Key data for the market: employment in the US accelerates in January and salaries rebound

Employment growth in the United States registered a notable boost in January, possibly driven by the resilience of the economy and labor efficiency, which encouraged companies to hire and retain workers. This trend could act cas a safeguard against the possibility of a recession this year.

According to the Department of Labor’s Bureau of Labor Statistics report published this Friday, nonfarm payrolls added 353,000 jobs last month. Notably, December data was revised upward, revealing the addition of 333,000 jobs instead of the previously reported 216,000. Contrary to the expectations of economists surveyed by Reuters, who anticipated an increase of 180,000 jobs, estimates ranged between 120,000 and 290,000.

This increase in employment significantly exceeds the 100,000 monthly jobs necessary to maintain working-age population growth.

How the Federal Reserve will react

Despite labor market momentum slowing from the brisk pace of 2022, attributed in part to high interest rates imposed by the Federal Reserve, remains enough to support the economy, thanks to strong consumer spending.

Average hourly earnings saw an increase of 0.6% last month, compared to 0.4% in December. In the last 12 months until January, Wages increased by 4.5%, exceeding the previous month’s 4.3%. This annual wage growth is considerably above the pre-pandemic average and the 3.0% to 3.5% range considered consistent with the Federal Reserve’s 2% inflation goal.

With an unemployment rate of 3.7% in January, it is important to note that this figure is not directly comparable to that of December due to new population estimates incorporated into the household survey.

Although the Federal Reserve left interest rates unchanged this week, its chairman, Jerome Powell, rsupported economic strength by stating that rates had peaked and are expected to decrease in the coming months.

Despite notable recent layoffs, such as the 12,000 announced by United Parcel Service, most economists’ attention is focused on labor productivity, which has outpaced annualized growth in 3% duthree consecutive quarters, as well as the moderation of labor costs.

Although some financial markets have lowered their expectations for a rate cut in March, they now anticipate the Federal Reserve will begin reducing borrowing costs in May, according to CME Group’s FedWatch tool. Since March 2022, the Federal Reserve has raised its interest rates by 525 basis points, placing them in the current range of 5.25% to 5.50%.