In January, the country’s employers made a remarkable increase in employment, adding 353,000 jobs. This demonstrates the economy’s resilience in the face of the highest interest rates seen in 20 years.

According to the government’s report on Friday, the number of jobs added last month was higher than expected, surpassing the previous gain of 333,000 in December which was also revised to a higher number. The unemployment rate remained at 3.7%, which is just slightly above the lowest rate in fifty years.

In January, there was an unexpected rapid increase in wages. The average hourly pay saw a sharp rise of 0.6% from the previous month, which is the largest monthly gain in almost two years. Compared to January 2023, there was a significant growth of 4.5%. This strong trend in hiring and wage growth may create difficulties or delays for the Federal Reserve’s plan to decrease interest rates later in the year.

Recent increases demonstrate companies’ commitment to continue hiring in response to consistent consumer spending. This occurs as the increasingly heated presidential election heavily relies on perceptions of President Joe Biden’s handling of the economy. Surveys indicate widespread dissatisfaction, largely due to prices remaining significantly higher than before the pandemic, despite inflation decreasing. However, there are some recent polls that suggest public approval is gradually rising.

This week, the Federal Reserve acknowledged the strength of the economy, with Chair Jerome Powell stating that it is performing well and the job market is still robust. The central bank stated that although they are close to reducing interest rates, they are not rushing to make this decision.

The information in the job report from Friday indicated significant increases in employment across various industries. 74,000 jobs were added in the professional and business services category, which includes roles such as managers and technical workers. Healthcare companies saw an increase of 70,000 jobs, while retailers added 45,000 jobs. Governments at all levels added 36,000 jobs and manufacturers added 23,000 jobs.

For the past two years, the unemployment rate has been less than 4%, which is the longest period since the 1960s.

According to Rubeela Farooqi, the chief U.S. economist at High Frequency Economics, the labor market remains resilient and is defying predictions of weakening. She believes that this data provides strong evidence for the Federal Reserve to exercise patience in considering rate cuts. If job and wage growth continue to be strong in the next few months, policymakers will not feel pressured to lower rates.

The Federal Reserve increased its benchmark rate 11 times starting in March 2022 in an effort to combat inflation. It was widely predicted that the rise in borrowing costs would lead to higher unemployment rates and potentially a recession. However, the economy has been able to generate enough employment opportunities to avoid a downturn while also keeping inflation in check. As a result, inflation gradually decreased throughout 2023, making it more probable that the Fed would successfully achieve a “soft landing” by controlling inflation without negatively impacting the economy.

The recent news of major companies such as UPS, Google, and Amazon announcing layoffs has sparked worries about a potential increase in job cuts. However, when compared to the overall size of the workforce, these layoffs have not had a significant impact on the job market. Looking at historical data, layoffs are still relatively uncommon, hiring is still steady, and the unemployment rate indicates a strong economy.

Overall, consumers have displayed greater durability than predicted despite the Federal Reserve’s increase in interest rates. After saving money during the pandemic, the majority were willing to use it once the economy reopened. Additionally, a surge of individuals retiring early, possibly due to the effects of COVID-19, has reduced the number of workers available and added to the shortage in the job market.

There has been a gradual increase in the trust of the public, as seen in various recent surveys. According to the University of Michigan, consumer confidence has experienced the biggest jump since 1991 over the past two months. The Federal Reserve Bank of New York’s survey revealed that Americans’ predictions for inflation are now at their lowest in almost three years. The latest poll from The Associated Press-NORC Center for Public Affairs Research shows that 35% of American adults view the national economy positively, an increase from 30% at the end of last year.

The pace of job resignations among Americans, which is a reliable indicator of wage patterns, has returned to pre-pandemic rates. This implies that workers are now less assured of securing a more favorable job opportunity. Consequently, employers may feel less compelled to offer higher salaries to retain their employees, and may choose to raise prices in order to offset their increased labor expenses. This can lead to a continuous cycle of inflation.

Source: voanews.com