US job creation accelerated strongly in January amid a resilient job market, but the moderation in wage gains should give the Federal Reserve some comfort in its fight against inflation.
The Department of Labor’s employment report outside the agricultural sector showed this Friday (3) opening of 517 thousand jobs last month. December data was revised to show 260,000 jobs created instead of the previously reported 223,000.
Average hourly wage earnings rose 0.3% after rising 0.4% in December. That reduced the annual wage increase to 4.4% from 4.8% in December.
Economists polled by Reuters had projected openings of 185,000 jobs and rising wages by 4.3% on an annual basis.
With the January report, the Department’s Office of Labor Statistics published its annual payroll review and updated the formulas it uses to adapt the data to regular seasonal fluctuations in the facility survey.
The Office revised its sector classification system, which resulted in around 10% of jobs being reclassified into different sectors. It also incorporated new population estimates into the household survey, from which the unemployment rate is derived.
Thus, the January unemployment rate of 3.4% is not comparable with the December 3.5% rate.
The employment report should allow the Fed (Federal Reserve, US central bank), focused on wage inflation, to maintain a moderate pace of interest rate hikes and reduce the risk of a recession this year.
Fed Chair Jerome Powell told reporters on Wednesday that “the economy can go back to 2% inflation without a really significant slowdown or a really big rise in unemployment.” With wages moderating and inflation trending lower, economists are increasingly echoing this sentiment.
Government data this week showed there were 11 million job openings available at the end of December, with 1.9 vacancies for every person unemployed. The Fed on Wednesday raised its interest rate by 25 basis points to a range of 4.50%-4.75% and pledged “continued increases” in borrowing costs.
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