January jobs report: live updates and analysis

Surprisingly strong job gains and wage growth in January gave the White House a victory to talk about at a time when consumers are unsure ...

Surprisingly strong job gains and wage growth in January gave the White House a victory to talk about at a time when consumers are unsure about the economy, and will likely allow the Federal Reserve to explain more easily why it is about to raise interest rates.

But the big numbers could also stoke fears that economic policymakers have an even more pressing inflation problem on their hands, and will stoke speculation on Wall Street that the Fed could go further and faster by cutting its economic aid in the aim of stifling price pressures.

The hiring of forecasters surprised as employers added 467,000 jobs instead of the lackluster 125,000 analysts had expected amid the virus surge. Unemployment rose, but wage growth was very strong – the average hourly wage was 5.7% higher than a year earlier, a percentage point faster than economists expected.

President Biden and his advisers point to hard data as proof that his administration’s economic policies are working. Wage gains are robust, workers are finding opportunities and labor has power in today’s job market. Revisions to last year’s employment numbers showed that progress was even faster than previously reported.

Last year “was the greatest year of job creation under any president in history,” Biden said. posted on Twitter after the report, while celebrating January’s big win.

But the fact that wages are rising so rapidly could also increase fears that companies will raise prices to cover their rising labor costs, exacerbating inflation. A key economic report next week is expected to show the consumer price index rose 7.3% in the year to January, based on Bloomberg forecasts.

This should turn all eyes to the Fed. Fed Chairman Jerome H. Powell and colleagues are set to raise interest rates for the first time since 2018 at their next meeting in March, a move intended to calm the economy as inflation is at its fastest pace in nearly 40 years. Officials expected to find themselves in the awkward position of making the move and signaling what comes next, at a time when the latest labor market data was looking a bit gloomy. Instead, they will do so at a time when price gains and wage growth look heady.

Still, it can be difficult to draw a clear signal from Friday’s employment numbers, as they were likely susceptible to whims. The pandemic has upended all aspects of hiring, and tight labor markets may have prevented employers from making their usual post-holiday layoffs, disrupting seasonal adjustments in numbers.

The Fed will have to try to maneuver through the weirdness of the data, as virus outbreaks make economic forecasts a field of unbroken surprises.

“We will be humble and nimble,” Mr. Powell said. embarked on the political path of the central bank, speaking at a press conference last month.

“We will be guided by incoming data and evolving insights, which we will try to communicate as clearly as possible, evolving regularly” and transparently, he added.

Economists and investors on Wall Street took Friday’s data as a signal that the central bank may have to withdraw support for the economy even faster than it had expected. The wage figure in particular needed to grab the attention of policymakers: Mr Powell has previously signaled that the central bank would be concerned if wage growth outpaced productivity, a sign that this would drive prices higher over time.

“No matter how optimistic you are about productivity growth, the Fed cannot live with this pace, if it is sustained,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics, after the report.

Other Fed watchers have suggested this could increase the odds of an oversized rate hike in March. The Fed typically raises borrowing costs in quarter-percentage-point increments, but some investors have started pricing in an upcoming half-point move.

Friday’s data will “inevitably further fuel expectations that the Fed will trigger a larger hike” in March, Capital Economics’ Andrew Hunter wrote in a research note.

Investors Friday greatly increased their bets that the central bank could raise rates by six or seven quarter points in 2022, although they are still betting strongest on five moves this year at 9:30 a.m.

The Fed’s benchmark interest rate is currently close to zero, and five increases would put it in a range of 1% to 1.25% by the end of the year.

The Fed’s biggest problem right now is that it’s unclear when or how quickly inflation will fade. Used vehicle prices, which have been a major driver of the overall price increase, may be on the verge of stabilizing but have yet to noticeably calm down. Gasoline prices are go back upfood is more expensive and rents have risen sharply.

With job creations continuing apace, keeping the economy on track to meet central bankers’ maximum employment target, Fed officials will be able to focus more closely on preventing economic overheating. They try to make sure they don’t fall behind the curve of high inflation, which allows it to become so locked into consumer and business expectations that it becomes a permanent feature of the economic landscape. .

How the Fed finds equilibrium — and how much it is slowing the economy with its rate hikes this year — could also have significant policy implications. Voters are already gloomy about the outlook for the economy and President Biden is suffering in the polls.

Economists had expected economic growth to slow in 2022 as government support for the pandemic fades and the Fed withdraws aid. The fact that momentum is holding despite Omicron, and that revisions released on Friday showed even stronger job growth at the end of last year than first reported, offers the White House of good news to seize.

Ben Casselman contributed report.

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Newsrust - US Top News: January jobs report: live updates and analysis
January jobs report: live updates and analysis
Newsrust - US Top News
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