US Labor Market Surprises with Unemployment Rate Fall, Strong Wage Growth
The US labor market maintained its resilience in January, defying expectations with a decline in unemployment and higher-than-anticipated wage growth.
The Bureau of Labor Statistics reported on Friday that the unemployment rate unexpectedly fell to 4% in January, down from 4.1% in December. This marks the lowest unemployment rate since May 2024.
Despite falling short of expectations, the economy created 143,000 new jobs in January. However, December's job gains were revised upwards, adding an additional 100,000 jobs to the total over November and December.
Wage growth accelerated in January, rising 4.1% annually, surpassing economists' estimates of 3.8%. Monthly wage growth also increased to 0.5%. The labor force participation rate rose to 62.6%.
The combination of unemployment decline and wage growth signals continued strength in the labor market, potentially influencing the Federal Reserve's interest rate decisions. Market expectations now favor the Fed holding rates steady through its May meeting, with a 67% probability.
Economists view this data as supportive of the "broadly stable" labor market narrative described by Fed Chair Jerome Powell. Despite a slowdown in hiring, the market remains relatively stable, with low layoffs and sustained wage growth.
Josh Schafer, a Yahoo Finance reporter, states that the report indicates a favorable situation for those with jobs, but acknowledges the difficulty for those seeking employment.