According to the new report from the Bureau of Labor Statistics, the US labor market added 467,000 payroll jobs in January. Economists had expected just 125,000, because of the omicron virus.
Payroll job increases were widespread across sectors of the economy. Employers added 151,000 jobs in leisure and hospitality, 61,000 in retail, and 86,000 in professional services.
And wages grew rapidly in January: average hourly wages rose by 23 cents, which would constitute an increase of almost 9% on an annualized basis. Wages actually rose 5.7% over the past 12 months.
And the data from the household survey of workers were largely positive too. Though the unemployment rate was essentially unchanged, the labor force participation rate grew to 62.2%, indicating that some workers were coming back to the labor market from the sidelines; and the employment rate in the population also grew from 59.5 to 59.7%. The number of job leavers also rose to 959,000, indicating that the “Great Resignation” in the labor market continues as workers seek better job opportunities.
All of this suggests a job market that remains strong, despite fears of the omicron virus. One possibility is that employers kept workers on the payroll whom they ordinarily let go after the Christmas holiday season passes, since they have so much difficulty finding and keeping workers. The high quit rate and large wage increases suggest that these hiring difficulties continue for employers – a point also confirmed by the continuing high job vacancy rate that we observe in other BLS numbers.
The large wage increases are good news for American workers, whose wages have mostly stagnated for decades. But they might be viewed as bad news in our efforts to fight inflation. This report will no doubt strengthen the resolve of Jay Powell and the other Fed governors to raise interest rates in the coming year, as they try to dampen high consumer demand a bit (and as we wait for supply chains to become unclogged).