The new year opened with a bang when it came to the labor market, with the latest jobs report from the U.S. Bureau of Labor Statistics revealing a total nonfarm payroll gain of 517,000 new jobs in January.
That’s an eye-popping number that nearly tripled projections from various outlets. Bloomberg’s consensus called for 188,000 new jobs in January while a Reuters poll of economists predicted 185,000 additions.
The number of post-holiday season layoffs was much smaller than expected, helping to bolster payroll numbers, while upward revisions for each month from June to December also painted a much stronger picture of the jobs market than previously thought. December data was amended to 260,000 job gains, up from the previously reported 223,000. Fourth-quarter payrolls are now up by an estimated 291,000 jobs, more than the initially reported figure of 247,000.
The strong labor market was reflected in January’s unemployment rate of 3.4%, the lowest such figure since 1969. Wage growth cooled, ebbing to an increase of 0.3% in January after a rise of 0.4% in December. January’s annual wage gain stood at 4.4%, the lowest year-over-year increase since August 2021. Still, wage growth numbers were generally in line with expectations and, coupled with the strong job growth data, further dampened any optimism that the Federal Reserve would lean toward ending consistent hikes to its benchmark interest rate.
Employment in most industries is now above or near pre-pandemic levels. The largest gap remains in the leisure and hospitality sector, which remains 495,000 jobs below the pre-pandemic watermark. That segment, however, continues to see robust gains as Americans return to travel and dining out. Leisure and hospitality added 128,000 jobs in January — most among all sectors — with 99,000 of these gains in food and drink establishments.
Construction jobs grew by 25,000 in January, although most of these gains were among specialty trade contractors. Employment in residential construction is now up 3.5% year over year and up 11.6% from pre-pandemic levels, while jobs in nonresidential building are up 4.9% annually and eclipsed their pre-pandemic level in January.
With new home construction decelerating, residential construction may be in for modest job growth in the months ahead, said Odeta Kushi, deputy chief economist at First American Financial Corp.
“Residential building construction employment was little changed from December,” she said. “The slowdown in single-family homebuilding may be putting some downward pressure on residential building job gains, and there is likely more of that to come.”