The economy added more jobs in January than expected by economists. Employers created 517,000 jobs, according to the Department of Labor, a significant increase from the 260,000 new jobs recorded in December.
Highlighting the extraordinary vitality of the labor market is the unemployment rate, which fell to 3.4%, the lowest since 1969, meaning that unemployment has not been this low in the United States for over half a century.
The high hiring numbers surpassed expectations and underscore the challenges faced by the Federal Reserve, the U.S. Central Bank (FED), which is trying to cool the labor market in an effort to tame high inflation. By raising interest rates – on Wednesday, Fed officials did so for the eighth time in a year – policymakers hope to force companies to cut back on spending, including hiring.
Job growth was broad-based, including in some sectors that economists expected to show signs of slowing down. Employers in the leisure and hospitality sector, including restaurants and bars, brought in many new workers.
However, wage growth remains moderate. The average hourly wage rose 4.4% over the year, more than expected in a Bloomberg survey. Wage growth has been slowing for months, although it continues to be faster than normal and notably faster than the pace that Fed officials say would be consistent with their 2% inflation target.
Fed officials raised interest rates by a quarter point. But with the large increase in the number of new jobs, will the interest rate hikes return to the half percent range?