Jobs report shocker: 353,000 hires crush forecasts, stokes inflation fears
The job market isn't cooling. At all.
Updated at 9:05 AM EST
The U.S. economy added another massive round of January jobs gains, data indicated Friday, confounding economists' forecast for a labor market slowdown and adding further fuel to concerns that inflation pressures could resurface over the coming months.
The Labor Department's Bureau of Labor Statistics said 353,000 jobs were created in January, down from the upwardly revised total of 333,000 recorded in December and well ahead of the six-month average of around 192,000. Economists were looking for a headline total of 185,000.
Average hourly earnings were up by a faster-than-expected 0.6% from the previous month, the biggest jump since March of 2022.
The year-on-year gain reached 4.5% from 4.1%, a figure that also topped Wall Street forecasts and the largest tally in nearly two years.
Meanwhile, the headline unemployment rate held at 3.7% while the labor-force participation rate held at 62.5%.
The blowout gains could explain Federal Reserve Chairman Jerome Powell's hawkish remarks to the media on Wednesday when he poured cold water on the chances of a March rate cut and noted that the job market remains surprisingly resilient.
"The labor market is the little engine that could, and it kept chugging away in January," said Morning Consult chief economist John Leer.
"When you combine strong jobs growth and consistent wage growth with falling inflation, the outlook for consumers over the first half of the year is encouraging," he added. "So encouraging that it feels less appropriate to cut interest rates before seeing some evidence of a moderation in economic activity."
U.S. stocks pared earlier following the data release, with futures contracts tied to the S&P 500 indicating a 1 point dip and those tied to the Dow Jones Industrial Average suggesting a 140 point decline. The tech-focused Nasdaq is called just 2 points higher.
Benchmark 10-year Treasury note yields were marked eight basis points higher at 3.967%, extending the paper's four-day increase to around 21 basis points. Benchmark 2-year notes were pegged 20 basis points higher at 4.394%.
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Earlier this week, payroll-processing group ADP said private-sector hiring slowed to 107,000 last month, well shy of Wall Street's 145,000 forecast, with the wage gains for job switchers falling to the lowest levels in more than two years.
Challenger Gray details corporate layoffs in its benchmark monthly report and said companies let go of around 82,300 people in January, paced by the financial and technology sectors.
The report said the tally was the worst start to the year since 2009, excluding last January's total.
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“Waves of layoff announcements hit US-based companies in January after a quiet fourth quarter," said Challenger Gray's senior vice president, Andrew Challenger. He noted a big focus on cost-cutting and "broader economic trends and a strategic shift towards increased automation and AI adoption in various sectors."
The CME Group's FedWatch now indicates just a 19.5% chance of a quarter-percentage-point Fed rate cut in March, down from 35% prior to the release and 74% at the end of last year. The odds of a May reduction, meanwhile, fell to around holding at around 79%.
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