The United States added 517,000 jobs in the first month of 2023 according to the January jobs report released by the Bureau of Labor Statistics on Friday morning, moving the unemployment rate to 3.4 percent with a number that blew past the forecast for 188,000 new payrolls.
The better-than-expected top line number is a stark contrast to the jobs report for December in which BLS reported that the economy added 223,000 jobs — the weakest report in 2022 — and the unemployment rate was 3.5 percent.
To kick off 2023, January saw job growth led by leisure and hospitality, professional and business services, and health care jobs — though the leisure and hospitality sector is still below its pre-pandemic level in February 2020. The gains moved the labor force participation rate to 62.4 percent in January, still below the pre-COVID level of 63.3 percent recorded in February 2020.
But while January's report was a big one for jobs, it was not a big one for earnings. Workers' wages increased 0.3 percent in January for an annual advance of 4.4 percent — still lagging behind inflation and leaving Americans with a cut to their real wages.
The seemingly good news of the headline number of new jobs reported for January was taken as bad news by Wall Street on Friday morning over fears that the Federal Reserve's interest rate hikes aren't done and there's shrinking hope among those who had hoped the Fed would cut interest rates in the second half of 2023.
Wall Street futures tumbled after the January employment data dropped, with the dow dropping more than 215 points, S&P 500 dipping more than 50 points, and the Nasdaq falling more than 250 points.
Earlier this week, the Federal Reserve announced its eighth consecutive interest rate hike, putting the key rate at its highest level since the financial crisis of 2007-08 as it continues fighting to choke inflation out of the U.S. economy and insisting that a "soft landing" is still possible even as inflation refuses to budge downwards.
New Consumer Price Index data for January will be released on February 14, giving another look at whether the Fed's attempts to bring inflation down to its goal of just two percent without sending the U.S. plunging into a full-blown recession are making progress.
But jobs reports like the one issued Friday for January 2023 showing more jobs and still-rising wages means the Fed's attempt to slow borrowing, spending, and other economic activity to reduce inflation hasn't worked yet — and more interest rate hikes are likely at the central bank's meetings in March and May.
January's jobs report also hit as companies across economic sectors continued layoffs started in 2022. Companies slashing positions include PayPal, Google, Microsoft, Goldman Sachs, FedEx, Hasbro, Dow Chemical, Spotify, 3M, Vox Media, CapitalOne, Wayfair, and DirecTV. When those losses might start registering on jobs reports remains to be seen, but the layoffs are expected to continue in 2023.