The Jobs Report – January 2023

Highlight

In January, the economy added 517k jobs, a significant increase from last month’s revised 260k gain. Expectations were for a gain of 188k jobs. This is a positive surprise for the labor market and the economy. Private payrolls surged by 443k jobs. The last two months’ reports were revised up by 71k.

What you need to know:

• The unemployment rate fell from 3.5% to 3.4%. The household survey showed a gain of 894k jobs, and the labor force increased, both positive signs for the economy. These data, while encouraging, were boosted in January by the BLS’s population adjustments that resulted from the Census Bureau’s updated estimates.
• Wages increased by 4.4% yoy, down from last month’s 4.6% increase. Wage increases are solid but again lag inflation this month as workers are still falling behind in real terms. The deceleration in wage increases is good news for policy makers as they fear a strong job market could put pressure on inflation. 
• The 3-month average of job gains increased to 356k from last month’s 291k. This reverses the recent declining trend.
• We believe the January jobs report was undeniably strong beating expectations. Recent jobs reports have seen a modest deceleration that this report reversed. In our view, the breadth of this report is impressive. The strength is somewhat at odds with recent economic data that showed the economy in some areas, like manufacturing, to be cooling significantly. It remains to be seen if this report will temper the growing market sentiment that the Fed is nearly done raising rates.