February 4, 2023

The US economy added +517,000 jobs in January, blowing away expectations of a +187,000 increase.

In addition to the surprise outperformance in January, previous months were revised upwards by +34k in November and +37k in December, for total of +71k.

As a result, average job gains over the past three months were +356k per month

Leisure and hospitality led gains, adding +128,000 jobs in January. However, this remains -495,000 (or -2.9%) below pre-Covid levels.

Professional and business services added +82k jobs, government added +74k, health care +58k, retail +30k (its first gain in several months), construction +25k, transportation and warehousing +23k, social assistance +21k, and manufacturing +19k.

The US unemployment rate fell to 3.4%, its lowest rate since May 1969.

In fact, the unemployment rate went down despite an increase in the labor participation rate to 62.4%, matching its previous post-Covid high (labor participation remains down, following Covid).

The absolute number of unemployed (actively seeking work) fell below 5.7 million, lower than before Covid, in what was considered a very robust job market.

Average hourly wages rose +0.3% m/m in January, up +4.4% from a year ago. However, this remains below the rate of consumer inflation (CPI = +6.4% y/y in December) so real wages have still declined.

In 3Q2022 (the latest available calculation), real hourly wages were down -4.0% from a year before.