Updated Feb 2, 2024 - Economy

January jobs report shows the labor market is hot, hot, hot

Illustration of a thermometer shaped like an upwards arrow, with the mercury rising.

Illustration: Brendan Lynch/Axios

Remember that talk about hiring cooling off? Nevermind.

What's new: The economy kicked off 2024 with a blockbuster gain of 353,000 jobs in January, the most in a year.

  • Hiring in December, too, was hotter than previously thought, with revisions showing 333,000 jobs added — 117,000 more than first reported.

Why it matters: The details of the payrolls report show an incredible environment for working Americans and a job market that, so far, appears unstoppable.

  • Employers look to be hiring at a furious pace, joblessness remains low and wage growth is beating inflation — developments that all defy predictions of a more muted labor market.

What they're saying: "If the dominant labor market narrative in 2023 was slow and steady moderation, then 2024 began fast and furious," Indeed economist Nick Bunker wrote in a note.

Details: The unemployment rate held at an ultra-low 3.7%. That means the jobless rate has now been below 4% for two years — a historic stretch you would have to go back to the late 1960s to beat.

  • Meanwhile, wage growth was strong: Average hourly earnings rose 0.6% last month. Over the last 12 months, wages by this measure are up 4.5% — which looks likely to top inflation over the same period.

The intrigue: The labor market's reacceleration complicates the Fed's plans to lower interest rates. Powell all but took a March rate cut off the table at his Wednesday press conference. If he hadn't, it's fair to say, this morning's report would have done it for him.

  • Powell said the Fed wants more confidence that inflation is surely defeated. But officials might fear that signs of a heated labor market will keep inflation sticky — especially as the supply-side factors helping cool price pressures fade away.
  • "The dramatic upside surprise to both jobs and wage growth means that a March rate cut must be off the table now, and a May cut is also now potentially on ice," Seema Shah, chief global strategist at Principal Asset Management, wrote.

The other side: The White House isn't worried about a too-hot labor market sparking inflation.

  • "We're always happy to see a very strong job market and we're particularly happy to see wages outpacing prices," Jared Bernstein, chair of Biden's Council of Economic Advisers, told reporters this morning."The best indicator of inflation is inflation."

Between the lines: Things mostly look good for American workers, but it's hard to imagine the Fed cutting interest rates as long as the economy is adding 300,000 jobs a month and wages are reaccelerating.

Data: Bureau of Labor Statistics; Chart: Axios Visuals
Data: Bureau of Labor Statistics; Chart: Axios Visuals

What to watch: There was one key detail that may point to a job market slowdown in the months ahead.

By the numbers: The average workweek was 34.1 hours in January, down from 34.3 hours in December. The average workweek is down half an hour over the last year.

  • That is the lowest number since 2010 outside the pandemic recession, ZipRecruiter chief economist Julia Pollak notes.
  • "When consumer demand slackens, companies typically cut workers' hours before cutting payrolls," Pollak said in a note. "Today's work week reading flashes a warning sign for the economy that job cuts could be looming."

Yes, but: Last month's drop could partly reflect unusually cold January weather, which tends to cause cutbacks to hours in construction and other sectors with outdoor work.

  • The shorter workweek may also have been a factor in that strong growth in average hourly earnings, as an arithmetic consequence of salaried workers receiving their normal pay for working a shortened week.

Of note: There have also been a slew of layoff announcements in recent weeks, especially from tech and media firms, which would not yet be reflected in monthly payroll reports. This week, UPS joined the club, announcing it will cut payroll by 12,000 jobs.

  • That said, large rounds of layoffs last year created a minimal dent in economy-wide employment.
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