US Economy Starts 2024 with Strong Job Growth of 353,000

The US economy showed strength and resilience in the first month of 2024, adding a whopping 353,000 jobs, according to the latest data from the Bureau of Labor Statistics (BLS). According to FactSet, this was much higher than the expected gain of 176,500 jobs. The unemployment rate stayed at 3.7%, the lowest level since 1969.

Chief economist and principal at RSM US, Joe Brusuelas, told CNN that the unemployment rate staying below 4% for 24 months was “truly remarkable”. The word “remarkable” kept coming to his mind as he looked through the report.

The strong job growth came despite the challenges posed by the COVID-19 pandemic and the inflationary pressures. It also came after the Federal Reserve raised interest rates 11 times since 2022 to keep inflation under control. The Fed paused its rate hikes in December and signalled to cut rates three times in 2024.

The January job report reduced the chances of a rate cut in March, as investors saw the economy performing better than expected. The CME FedWatch Tool showed that the probability of a March rate cut dropped from 38% to under 20% on Friday.

Brusuelas said that the Fed would have to be careful in managing expectations, as the market still expects rate cuts this year. He said the Fed’s message was clear: it wants to cut rates, and the question is not if, but when.

Job Growth Accelerated from Previous Months

The January job growth was higher than expected and faster than the previous months. The BLS revised the job gains for December and November, showing that the economy added more jobs than initially reported.

The December job gains were revised by 117,000 to 333,000, and the November job gains were revised by 9,000 to 182,000. This means the economy added 449,000 more jobs in the last three months of 2023 than previously estimated.

Economists had warned that the January job report could be tricky to predict because January is usually a month of job losses, as seasonal workers are laid off after the holidays and businesses cut costs. The BLS also applies new seasonal adjustment factors at the start of the year, which can affect the data.

However, some economists had also suggested that January could surprise on the upside, as the economy showed signs of recovery from the pandemic and the inflation. The January report confirmed their optimism.

Job Growth Was Broad-Based Across Industries

The January job growth was not concentrated in a few sectors but spread across most industries, except mining and logging, which lost jobs.

The pandemic hit the leisure and hospitality sector hard. It added only 11,000 jobs in January.The industry was only 0.4% (75,000 jobs) away from reaching its pre-pandemic level of employment in February 2020.

The leisure and hospitality sectors and other services sectors benefited from the strong demand for experiences among Americans, who spent more on travel, entertainment, and dining out as the pandemic eased.

The January job report showed that the US economy started 2024 with a bang and that the labor market was recovering well from the pandemic and inflation. The report also showed that the Fed had room to manoeuvre in its monetary policy and that the market would closely watch its next moves.

US jobs report by industry

Source: US Bureau of Labor Statistics

Note: Employment numbers reflect monthly changes in non-farm jobs and are seasonally adjusted. Figures from the two most recent months are preliminary.

Jillian Hiscock, the owner of a new sports bar in Minneapolis, had no trouble hiring more than 20 workers for her business.

Hiscock plans to open A Bar of Their Own next month, where only women’s sports will be shown on TV. The Sports Bra, a pioneer in the industry from Portland, Oregon, inspired the idea. Hiscock launched a crowdfunding campaign last spring and received much support from the Twin Cities community.

150 applications for 25 to 30 positions

The same support was evident in the hiring process of A Bar of Their Own: She got 150 applications in just two days for 25 to 30 positions.

“It was a good problem to have, but I wanted to be realistic about who we could talk to, considering our timeline,” she said. “But yes, we had to stop it in less than two days with over five times more applicants than we needed for the jobs we had.”

The candidates came from a variety of backgrounds; some had worked in restaurants, while others were unemployed or seeking a change of profession.

We’ve observed a lot of folks who have changed their connection with employment after the epidemic ended and everything reopened, the speaker remarked. “People are less interested in doing something for someone who doesn’t care about them as a human because we all know how easily that can be lost.”

She said that people still want a better balance between their work and personal life.

“People were very enthusiastic about this, not just as another job, but as a chance to be part of something bigger,” she said.

A great year.

The January jobs report also included the final numbers for the BLS’ yearly review of payroll data. US job growth last year was weaker than initially estimated (by 266,000 jobs); however, that was not as bad as the early estimates suggested it could be.

3.06 million jobs were added last year

Even with those revisions, 2023 was a great year for job growth. According to seasonally adjusted data, almost 3.06 million jobs were added last year. Apart from the record-breaking 2021 and 2022, that was the highest annual jobs number since 1999 and the 17th highest on records that go back to 1939, BLS data show.

Another surprise was the wage increase, which rose 0.6% for the month and 4.5% year-over-year.

This increases the likelihood that nominal wage growth will not eventually return to levels consistent with meeting the inflation target, particularly if the labor force participation rate continues to rise, according to a note released on Friday by chief economist Brian Coulton of Fitch Ratings. “Wages growing at this rate in a tight labor market is problematic for the Fed.”

The strong economy in the United States has been driven by the strong labor market, which has boosted consumer spending and economic growth in recent months. And even though businesses have slowed down hiring, people are quitting less, and wages have moderated, the lower inflation rate means that people’s incomes are finally stretching further than they have in years.

But even with the strong economy, Americans have been primarily pessimistic — though their mood is improving. A new CNN poll released Friday showed that 35% of Americans say things in the country today are going well. That’s better than the 28% who had a positive outlook last fall.

The poll found that the mood is strongly influenced by politics, with the increase led by Democrats.

While the reported 4.5% annual hourly earnings growth on Friday may cause a mild headache for the Fed, Brusuelas said it’s ultimately good for the American mindset.

“This should bury the last recession fears,” he said. “It’s about jobs, and it’s about what people earn, and this data shows the rise in productivity. Higher productivity leads to more jobs, better pay and higher living standards. It’s that legendary tide that lifts all boats.”