Defying expectations of another Covid slowdown, the U.S. economy added 467,000 jobs in January, the Labor Department reported Friday.
Officials also announced huge upward revisions to previous reports, raising the December job gains figure from 199,000 to 510,000 and the November figure from 249,000 to 647,000 — for a total of 709,000 additional jobs. The latest numbers indicate that the U.S. has now regained about 19 million of the 22 million jobs lost during the pandemic.
Although the unemployment rate rose slightly to 4% — a result of more people entering the job market, with the labor force participation rate climbing to an expansion-high of 62.2% — experts say the latest report shows an economy that is running red hot, largely dodging the effects of the omicron variant of Covid-19 as the recovery from the pandemic plows ahead. The tight labor market boosted wages, which rose 5.7% in January on a year-over-year basis.
Much less damage than feared: “We had expected Omicron to lead to a spike in unpaid sick-leave during the payroll week that would be a drag on nonfarm payrolls,” Bank of America’s Stephen Juneau said in a research note. “That obviously didn't manifest.”
Instead, payrolls grew even as millions of workers reported illness in January; contrary to expectations, those illnesses did not translate into job losses. And the sectors that were expected to get hit hardest by the omicron wave, including retail and leisure and hospitality, showed positive growth during the month.
There were questions, however, about the revisions made by the Labor Department that had a big impact on the report. The large increases in the number of jobs in November and December were driven in part by adjustments to the model used for seasonal hiring and firing, and the same adjustments reduced the number of jobs reported earlier in the year, though the full-year effect was still positive.
Stephen Stanley, chief economist at Amherst Pierpont Securities, said the report was “a crazy mess” in some respects, but most economists agreed that the positive results reflect real gains. “I don’t think anybody would dispute that we’re moving in the right direction,” Valerie Wilson of the left-leaning Economic Policy Institute told The Washington Post.
Biden celebrates: After spending much of the week preparing the press for a weak or even negative report, the White House quickly shifted into a celebratory mode.
“America’s job machine is going stronger than ever,” President Joe Biden told reporters. “I know it hasn’t been easy. I know that January was a very hard month for many Americans,” he added. “But here’s the good news: We have the tools to save lives and to keep businesses open, keep schools open, keep workers on the job and sustain this historic economic comeback.”
Labor Secretary Marty Walsh said the report shows that “America is getting back to work.”
The Fed will take notice: The strong jobs report will do nothing to discourage the Federal Reserve from raising interest rates starting in March. The only question is whether the strong job growth will inspire the central bank to raise rates more quickly.
“The data today were noisy, but the report was a very strong positive surprise that provided further evidence that the Fed has met its maximum employment mandate,” BofA’s Juneau said. “Overall, we think today's report keeps the Fed on track to hike rates by 25 [basis points] at every meeting this year.”
