© Reuters. FILE PHOTO: Pedestrians walk through mist from steam vents during a cold snap in Washington, US, March 27, 2022. REUTERS/Joshua Roberts
By Lucia Mutikani
WASHINGTON (Reuters) – US job growth accelerated sharply in January amid a persistently resilient labor market, but a further moderation in wage gains should give the Federal Reserve some comfort in its fight against inflation.
The Labor Department’s closely watched employment report’s survey of establishments on Friday showed that nonfarm payrolls surged 517,000 jobs last month. Data for December was revised higher to show 260,000 jobs added instead of the previously reported 223,000.
Average hourly earnings rose 0.3% after gaining 0.4% in December. That lowered the year-on-year increase in wages to 4.4% from 4.8% in December. Economists polled by Reuters had forecast payrolls increasing by 185,000 jobs and wages advancing 4.3% year-on-year. Payroll forecasts range from an increase of 125,000 to 305,000.
With January’s report, the Labor Department’s Bureau of Labor Statistics (BLS) published its annual payrolls “benchmark” revision and updated the formulas it uses to smooth the data for regular seasonal fluctuations in the establishment survey.
The BLS revised their industry classification system, which resulted in about 10% of employment being reclassified into different industries. It also incorporated new population estimates in the household survey, from which the unemployment rate is derived.
As such January’s unemployment rate of 3.4% is not comparable to December’s 3.5% rate.
The employment report should allow the US central bank, focused on wage inflation, to maintain a moderate pace of rate hikes and reduce the risk of a recession this year.
Fed Chair Jerome Powell told reporters on Wednesday that “the economy can return to 2% inflation without a really significant downturn or a really big increase in unemployment.” With wages moderating and inflation trending lower, economists are increasingly agreeing with that sentiment.
The revisions will attract attention after researchers at the Philadelphia Fed published a paper in December that suggested employment growth in the second quarter was overstated by a million jobs. But economists have dismissed this claim.
Government data this week showed there were 11 million job openings at the end of December, with 1.9 openings for every unemployed person. The Fed on Wednesday raised its policy rate by 25 basis points to the 4.50%-4.75% range, and promised “ongoing increases” in borrowing costs.
