Unemployment fell in January as the number of new jobs drastically exceeded analysts’ forecasts, according to data from the Bureau of Labor Statistics released Friday.
Total nonfarm employment increased by 517,000, far surpassing analysts’ expectations of 187,000 new positions. The unemployment rate declined from 3.5% in December to 3.4% in January, falling below estimates of 3.6% and marking the lowest joblessness rate since 1969.
“The stronger than expected employment report stands in direct conflict with fears of an imminent recession, which has been weighing on the minds of economists and business leaders alike,” Bankrate Senior Economic Analyst Greg McBride said in comments provided to The Daily Wire. “The strength of the January employment report will raise eyebrows among Federal Reserve officials who’ve pledged to keep interest rates higher for longer.”
The unemployment data came after the central bank announced a 0.25% increase in the target federal funds rate, marking a slowdown from previous 0.75% and 0.5% rate hikes meant to combat inflation. Members of the Federal Open Market Committee said in a statement that “ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive.”
Average hourly earnings accordingly rose 4.4% year-over-year as of January, slightly exceeding the pace estimated by analysts and declining from the 4.6% year-over-year pace seen in December. Price levels have grown at a faster rate than nominal wages over the past two years, suggesting an erosion of purchasing power among households.
The gains in employment were led by the leisure and hospitality sector, which added 128,000 positions; the professional and business services sector, which added 82,000 positions; and government agencies, which added 74,000 positions.
Even as unemployment continues to decline, labor force participation has failed to recover in the wake of the lockdown-induced recession: the metric, which tracks the percentage of the working-age population currently employed or searching for a position, remained unchanged at 62.4% in January. Federal Reserve Chair Jerome Powell has remarked that the workforce “participation gap” is largely the result of “excess retirements” that occurred beyond “what would have been expected from population aging alone.”
Price levels for many products and services meanwhile remain elevated. Food prices and shelter costs have increased 10.4% and 7.5% year-over-year, respectively, even as headline inflation figures decrease due to a more recent decline in certain energy prices, according to data from the Bureau of Labor Statistics.
Biden administration officials have nevertheless taken credit for the employment gains despite lingering inflationary pressures and supply chain bottlenecks emerging from the tight labor market. White House Press Secretary Karine Jean-Pierre recently deflected questions from journalists regarding layoffs in the technology sector and noted that dismissals “remain near record lows according to job openings data.”
President Joe Biden responded to the newly released unemployment data on social media by proclaiming that “jobs are going up, inflation is going down, and my economic plan is working.”
House Ways and Means Committee Chairman Jason Smith (R-MO) said in a statement provided to The Daily Wire that the state of the economy does not reflect the “false advertising” from the administration. “Any job growth is good news, but labor force participation is still disappointingly below pre-pandemic levels,” he remarked. “Democrats’ war on work made sitting at home and collecting a check more profitable than getting a job. Better policies are needed for stronger job and wage growth.”