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U.S. job growth unexpectedly surged in January, underscoring the resilience of the labor market even in the face of high interest rates and stubborn inflation.
Employers added 353,000 jobs in January, the Labor Department said in its monthly payroll report released Friday, easily topping the 180,000 gain forecast by Refinitiv economists. The unemployment rate held steady at 3.7%, against expectations for a slight increase.
Wage growth also accelerated last month, with average hourly earnings – a key measure of inflation – rising 0.6%, double what economists expected. On an annual basis, wages rose 4.5% in January.
THE NUMBER OF HIGH-PAYING JOBS IS DWINDLING
In another show of strength for the economy, the report contained sizable upward revisions to job growth during the previous two months. Gains for November and December were revised up by a total of 126,000 jobs to a respective 182,000 and 333,000, the government said, suggesting that the labor market is stronger than it previously appeared.
The surprisingly strong report paints a picture of a job market that has gone largely unscathed despite the Federal Reserve’s aggressive interest-rate hike campaign, but it also diminishes the odds of an imminent rate cut.
“The dramatic upside surprise to both jobs and wage growth means that a March rate cut must be off the table now, and a May cut is also now potentially on ice,” said Seema Shah, chief global strategist at Principal Asset Management. “Certainly, with this kind of number, the six or seven rate cuts that markets had been pricing in seems very offside.”
Stock futures fell after the report dashed investor’s hopes for a March rate reduction, and called into doubt the prospect of a May cut.
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Job gains were broad-based last month, with the biggest gains in professional and business services (74,000), health care (70,000), retail trade (45,00), government (36,000) and manufacturing (23,000).
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The labor market has remained historically tight over the past year, defying economists’ expectations for a slowdown. However, there are some signs that cracks are beginning to appear after last year’s blistering pace of growth.
This is a developing story. Please check back for updates.