The US labor market showed continued signs of resilience in January as the unemployment rate unexpectedly fell, wages grew more than expected, and December’s monthly job gains were revised higher to show the US labor market exited 2024 on even better footing than previously reported.
Data from the Bureau of Labor Statistics released Friday showed the unemployment rate fell to 4% in January from 4.1% the month prior. The unemployment rate now sits at its lowest level since May 2024.
The US economy created 143,000 new jobs in January, less than the 170,000 expected by economists, and lower than the 307,000 seen in December. December’s monthly job gains were revised higher from a previous reading of 256,000. Meanwhile, November’s monthly job adds were also revised higher. Across November and December, the US labor market added 100,000 more jobs than initially thought.
Capital Economics deputy chief North America Economist Stephen Brown wrote in a note on Friday morning that the strength in payroll revisions and decline in the unemployment rate “keep the Fed on the sidelines” from cutting interest rates in 2025.
Following Friday’s jobs report, market pricing of the Fed holding interest rates steady through its May meeting move up to a 67% chance, up from a 61% chance seen a week ago, per the CME FedWatch Tool.
Wage growth, an important measure for gauging inflation pressures, rose 4.1% over the prior year in January, up from 3.9% in December and above the 3.8% economists had expected. On a monthly basis, wages increased 0.5%, above the 0.3% seen the prior month.
Meanwhile, the labor force participation rate ticked up to 62.6% from 62.5%.
The report shows “that people have jobs. Most of the people who want jobs have them, and people who have jobs are getting paid more,” Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo Finance. He added, “This doesn’t incentivize the Fed to do anything right now.”
Recent data has shown the labor market slowing but not rapidly deteriorating, as layoffs remain low.
New data from the Bureau of Labor Statistics released Tuesday showed 7.6 million jobs were open at the end of December, a decrease from the 8.15 million in November. This marked the largest sequential drop in openings since October 2023.
But other signs of cooling within the report held steady. The Job Openings and Labor Turnover Survey (JOLTS) also showed the hiring rate was flat at 3.4%. Meanwhile, the quits rate, a sign of confidence among workers, was unchanged at 2%.
