Job Growth Surges in January

The U.S. economy entered the new year with a strong gain in payroll employment and an unchanged unemployment rate. Job gains in November and December were much stronger than initially estimated, according to revisions of the establishment survey data. January’s jobs report shows that the job market remains unexpectedly strong despite the impact of the highest interest rates in two decades. The estimates confirm that the Fed will not be in a rush to cut interest rates in March.

Additionally, wage growth showed strength in January. On a year-over-year basis (YOY), wages grew 4.5% in January, stronger than an upwardly revised 4.3% in December but lower than the roughly 6% in the beginning of 2022. Wage growth is positive if matched by productivity growth. If not, it can be a sign of lingering inflation.

Total nonfarm payroll employment increased by 353,000 in January, faster than the upwardly revised increase of 333,000 jobs in December, as reported in the Employment Situation Summary. It was the biggest monthly gain in the past twelve months. The estimates for the previous two months were revised higher. The monthly change in total nonfarm payroll employment for November was revised up by 9,000, from +173,000 to +182,000, while December was revised up by 117,000 from +216,000 to +333,000. Combined, the revisions were 126,000 higher than the original estimates. Despite restrictive monetary policy, about 6.8 million jobs have been created since March 2022, when the Fed enacted the first interest rate hike of this cycle.

In January, the unemployment rate remained at 3.7% for the third consecutive month. The number of unemployed persons and employed persons showed little change.

The labor force participation rate, the proportion of the population either looking for a job or already holding a job, was unchanged at 62.5%. Moreover, the labor force participation rate for people aged between 25 and 54 rose 0.1 percentage point to 83.3%. While the overall labor force participation rate is still below its pre-pandemic levels at the beginning of 2020, the rate for people aged between 25 and 54 exceeds the pre-pandemic level of 83.1%.

January’s job gains were broad-based across sectors, led by professional and business services (+74,000), health care (+70,000), retail trade (+45,000), and social assistance (+30,000). Meanwhile, employment in mining, quarrying, and oil and gas extraction industry decreased by 5,000.

Employment in the overall construction sector increased by 11,000 in January, following an upwardly revised 24,000 gains in December. While residential construction added 2,700 jobs, non-residential construction employment added 7,600 jobs for the month.

Residential construction employment now stands at 3.3 million in January, broken down into 938,000 builders and 2.4 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction was 5,083 a month. Over the last 12 months, home builders and remodelers added 60,100 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 1,350,300 positions.

In January, the unemployment rate for construction workers rose by 0.7 percentage points to 5.2% on a seasonally adjusted basis. The unemployment rate for construction workers remained at a relatively lower level, after reaching 14.2% in April 2020, due to the housing demand impact of the COVID-19 pandemic.