US economy adds 353,000 jobs in January, off to a strong start to 2024

(CNN) — The U.S. economy added a surprise 353,000 jobs during January, far exceeding expectations for early 2024, according to Bureau of Labor Statistics (BLS) data released this Friday.

The unemployment rate remained at 3.7% compared to the previous month. This is the 24th consecutive month that the country’s unemployment rate has been below 4%.

“The fact that the unemployment rate has been below 4% for 24 consecutive months for the first time since 1967 is really remarkable,” Joe Brusuelas, chief economist and director of RSM US, told CNN Business. “And that’s the word I keep saying when I read this report: ‘extraordinary’. What an ‘extraordinary’ conclusion here.”

More than a year ago, it seemed almost certain that the labor market would feel the effects of (and potentially be affected by) the Federal Reserve’s aggressive rate-hike campaign. But after 11 gains and four pauses, the US labor market is seeing one of the longest periods of expansion this century.

The January jobs gain dashed market expectations that the Federal Reserve would cut rates sooner rather than later, perhaps as early as March, and that the central bank would cut rates six times in 2024. Investors’ likelihood of a rate cut in March dropped from 38% to less than 20% this Friday, according to the CME FedWatch tool.

However, the higher-than-expected figure should not sway the Fed from its current path as officials telegraph a trio of rate cuts coming this year, Brusuelas said.

“The Federal Reserve will have to manage expectations very carefully going forward,” he said. Powell said the central bank wants to cut, and now “the question is not if it will happen, but when.”

a positive surprise

Most industries added jobs last month, according to the BLS, with health care and social assistance recording the largest gain of 100,400.

Hiring accelerated from December, when job growth was more than previously estimated. Employment gains in December increased by 117,000 positions to total 333,000 for the month. November was also revised upward, but only by 9,000 jobs, to a net increase of 182,000.

January’s gains dashed economists’ expectations: Forecasters had predicted a net gain of 176,500 jobs last month, according to FactSet.

Still, economists caution that the January report is one of the hardest to forecast because it is typically a month with big job losses (seasonal workers are laid off after the holidays and other companies are looking to expand their business in the new year). I tighten my waist). Additionally, BLS applies new seasonal adjustment factors at the beginning of the year to smooth the data and help better understand trends.

For these reasons, some economists told CNN this week that it’s possible January could offer a bullish surprise. So did happen.

Wage growth was also a surprise, rising 0.6% month on month and 4.5% year on year.

“This increases the risk that nominal wage growth will not fall to a level consistent with meeting the inflation target on a sustained basis, particularly if the labor force participation rate refuses to rise further,” Brian Coulton, chief economist at Fitch Ratings, wrote in an article. Does.” The note was published this Friday. “In such a tight labor market, increasing wages at this rate is a problem for the Federal Reserve.”

This story is developing and will be updated.