WASHINGTON — In a surprise explosion of hiring, US employers added 467,000 jobs in January, in a sign of the economy’s resilience despite a wave of Omicron infections last month.
The government’s Friday report revised its estimate of job gains for November and December combined by 709,000. It also said that the unemployment rate had risen from 3.9% to still 4%, mainly because more people started looking for work and not all of them found jobs immediately.
Strong hiring growth for January, which defied expectations for only marginal gains, reflects the eagerness of many employers, even as the pandemic rages on. Businesses seem to see the Omicron wave as more of a temporary effect on the economy and remain confident about long-term growth.
“Employers have recognized that Omicron will be painful but short-lived, so they haven’t changed their hiring plans,” said Matthew Stevenson, CEO of SnagJob, a job listing site focused on hourly workers. “Demand for employers is as strong as ever.”
Also, the magnitude of job growth points to an economy in which high levels of recruitment and spending, coupled with supply constraints, are accelerating inflation, eroding wage growth and increasing pressure on households. Huh. Those factors could give the Federal Reserve the flexibility to raise interest rates, perhaps even faster, to quell inflation. The Fed has already indicated that it will start raising rates in March, and it may do so again at its next meeting in May.
Stock futures sank immediately on hopes that the Fed could intensify its efforts to tighten credit, which would potentially weaken the economy, before a partial recovery by mid-morning.
Daniel Zhao, senior economist at employment website Glassdoor, said healthy hiring – not only for January but also for November and December – is a sign that last month’s gains were not just a setback.
“This is a real trend, and job growth was faster than we realized,” Zhao said.
The report showed that a vast majority of Americans are now working or looking for work, a trend that makes it easier for companies to find workers. This may suggest that concerns have been raised about long-term labor shortages in at least some industries.
“There are workers out there — it’s taking time to integrate them back into the labor force,” Zhao said.
The overall outlook for the job market remains bright, with openings near record highs, the pace of layoffs and the unemployment rate reaching healthy levels already. The nation acquired more jobs last year, adjusted for workforce size, than any year since 1978. The unemployment rate fell nearly 3 percentage points – from 6.7% to 3.9% – the sharpest annual decline on record. Much of that improvement represented a rebound in 2020 from record job losses that were driven by the pandemic slowdown.
Yet the economy’s strong growth and hiring gains were accompanied by the highest inflation in four decades, fueled by sharp consumer spending on furniture, electronics, appliances and other goods and a vast infusion of federal aid that has now largely ended. It is done.
Poor supply chains disrupted the availability of many items, especially new and used vehicles, leading to a sharp rise in prices. Food, energy and housing prices also rose. High inflation has wiped out the wage benefits of many Americans.
The Omicron transition in the January-March quarter is likely to slow the economy, especially compared to the rapid expansion in the last three months of 2021, when it grew at a 6.9% annualized rate. Some analysts have forecast that growth will weaken to as low as 1% in the first three months of this year.
One reason for the slowdown: Americans cut their spending in January as the spread of the coronavirus discouraged some people from eating out, traveling and going to movies and other entertainment venues.
Yet as Omicron is fading away, there are signs that consumers are ready to spend again. Auto sales jumped in January after several months of decline. Car manufacturers have been able to gradually increase production. And Americans’ incomes grew at a solid pace last month, providing fuel for future spending.