U.S. Economy Adds 517,000 Jobs in January, Unemployment Drops To 3.4%

The latest economic data from the U.S. Bureau of Labor Statistics exceeds economist expectations of 187,000 jobs added and a 3.6% unemployment rate.

More than half-a-million jobs were added to the U.S. labor market in January, according to the latest data from the U.S. Bureau of Labor Statistics (BLS).

The U.S. added 517,000 jobs in January, nearly tripling average economist estimates of 187,000 jobs added. January’s uptick in jobs follows revised data of 260,000 jobs added in December 2022 and 290,000 jobs added in November 2022.

Leisure and Hospitality Sector Unemployment Increased

By industry sector, leisure and hospitality employment increased by 128,000 jobs in January, compared to an average of 89,000 jobs added per month in 2022; professional and business services added 82,000 jobs in January, compared to 63,000 averaged per month in 2022; government employment increased by 74,000 jobs in January; health care averaged 58,000 jobs, compared to 47,000 averaged per month in 2022; and retail trade added 30,000 jobs, compared to 7,000 averaged per month in 2022.

Furthermore, the U.S. unemployment rate dropped to 3.4 percent in January, beating economist expectations of 3.6 percent. The labor participation rate, meanwhile, registered at 62.4 percent in January, which is comparable to the 63.4 percent labor participation rate from pre-pandemic February 2020.

Employee Wages Increased 4.4% Year over Year

Employee wages in January also increased 4.4 percent year-over-year and 0.3 percent from December, according to BLS.

Relatedly, the Federal Reserve increased federal interest rates by 0.25 percentage points to 4.75 percent. The Federal Reserve, in its release announcing the rate hike, outlined its goal to lower inflation “at the rate of 2 percent over the longer run.” The U.S. Consumer Price Index (CPI), a widely used measure of economic inflation, was at 6.5 percent in December.

“In support of these goals, the Committee decided to raise the target range for the federal funds rate [from] 4-1/2 percent to 4-3/4 percent,” according to the release. “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”