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Let’s get the headline out of the way. The number of new jobs expected in January’s jobs report was around 188,000, down from the prior month’s 223,000. But the actual number came in at—wait for it—more than half a million (517,000 to be exact), which is more than double last month. This is an astonishing beat. And what is even more surprising is that the headline beat is only part of the story.
The other parts are that all of the supporting data beat expectations as well. Labor force participation was up, and the unemployment rate was down—to a 53-year low. Perhaps most significantly, the average workweek jumped up by almost 10 percent, from 34.4 to 37.7 hours, which adds another significant chunk of labor demand. Companies are hiring quickly and working their existing staff harder.
That’s Not All . . .
Regular adjustments to population figures meant that household employment rose as well, a weaker data point from prior reports. Annual benchmark revisions meant employment at the end of last year was 813,000 higher than previous data suggested. As part of that, job creation in the last two months was revised up by 71,000. All of this data points only one way: not only do job growth and labor demand remain strong now, but they have been much stronger than reported for the past year.
This is all very good news from the perspective of workers. But the concern is that with labor demand this hot, wage inflation would accelerate and keep the Fed hiking rates. Here too, surprisingly, the news was good. Average hourly earnings held steady at 0.3 percent for the month but edged down from 4.6 percent to 4.3 percent for the year. While wage growth is still above what the Fed would like to see, it is moving in the right direction.
What Does It All Mean?
For the economy, a recession may be farther off than we expected, which is good. For markets, though, while wage growth is still ticking down, this will make the Fed even more cautious about ending rate hikes. On balance, it’s probably a wash for markets, but unabashedly good news for the economy. Overall, it’s a real Goldilocks report—and much better than what had been expected.
