US job creation to accelerate unexpectedly in early 2024 | Economy

The United States continues to have a bomb-proof job market. The unemployment rate has been below 4% for two full years, something not seen in decades. The economy has added jobs for 37 straight months despite interest rate hikes approved by the Federal Reserve to combat inflation. What’s more, January’s numbers exceeded all forecasts and show an unexpected acceleration in job creation.

The economy added 353,000 nonfarm payroll jobs in January, according to data released Friday by the Bureau of Labor Statistics, which is dependent on the Labor Department. That’s nearly double what analysts expected and the highest figure for the year. The unemployment rate was 3.7%, which corresponds to 3.7% at the end of 2023.

Employment is growing in nearly every sector, but professional and business services showed the strongest strength in January, adding 74,000 jobs; the healthcare sector, which will create another 70,000 jobs; retail trade (+45,000) and social assistance (+30,000). Industrial employment (+23,000) and public sector employment (+36,000) also rose, and the only sector to fall was mining and forestry, which lost 6,000 jobs.

The job increase is good news for President Joe Biden as he heads into the year as he seeks re-election. Consumer confidence is improving, but high prices, especially for food, weigh on the minds of many citizens. Biden, who welcomed the job creation data, began criticizing distribution companies for not adjusting their profits and for keeping prices he said were too high.

Markets have seen the numbers move lower, with stock market prices falling and bond interest rate yields rising, as the new data is seen as eliminating the possibility of lower money prices.

Double polling

In the United States, the labor market is primarily measured through two surveys: one for companies and one for households. The former is used as the main indicator of job creation, while the latter is used to measure the active population and unemployment rate. Therefore, sometimes the numbers do not match perfectly and are somewhat contradictory. The household survey estimates the active population at 167.3 million in January, points to 6.12 million unemployed and indicates that the number of people in work fell by 30,000 last month to 161.15 million, in contrast to the company survey figures. the market follows. This contradiction explains why the unemployment rate is not falling.

The resilience of the American economy has exceeded all expectations. Economists had predicted that bringing down inflation, the lowest in four decades, would require triggering a full-blown recession by tightening monetary policy. The truth, however, is that the economy continues to grow at a good pace and create jobs despite rising money prices.

Federal Reserve President Jerome Powell has been pushing for more than a year for such a soft landing, reducing inflation to the price stability target traditionally set at 2% without unduly hurting employment, another Fed goal. Dual mandate of the central bank. So far he has been successful, although he does not dare to claim victory. The Federal Reserve’s preferred measure of inflation fell to 2.9%, falling below 3% for the first time since 2021. In addition, if we recalculate the rate of price growth for the last quarter or the last half of the year on an annualized basis, the level will already be below 2%.

The market now expects a cut in interest rates and the Federal Reserve has begun preparing for it, but Powell asked for patience until he is confident that a reduction in inflation to 2% is sustainable. The market interpreted this as all but ruling out a rate cut at the March Monetary Policy Committee meeting, which the central bank president himself called “unlikely.” Given January’s job creation data, such an imminent rate cut seems nearly impossible.

On Wednesday, Powell noted that the labor market remains “strong.” “Our unemployment rate has been less than 4% for two years now. This hasn’t happened for 50 years. This is a good job market. And we saw a decrease in inflation. We already talked about this. We’ve had six months of good inflation data and we’re hoping for more to come. This is a good situation. Let’s be honest. It’s good economics. But what are the prospects? We will see this in the review. Looking ahead, we expect growth to be moderate. “Obviously we’ve been expecting this for some time and it hasn’t happened, but we’re hopeful that it will soften as the normalization of the supply chain and labor market takes its course,” he explained at a news conference.

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