By Geoffrey Smith
Investing.com -- The U.S. labor market defied fears of a Covid-driven slowdown in January, adding 467,000 nonfarm jobs in the month, well ahead of estimates.
The Labor Department also sharply revised up figures for the previous two months' payrolls gains, suggesting that jobs growth has been a lot stronger through the holiday season and the start of 2022 than previously thought. December's figures were revised upward to show a rise of 510,000 jobs rather than the 199,000 originally reported, while November's gain was revised up even more sharply, to 647,000 from the 249,000 previously estimated.
The figures illustrate the difficulties of compiling statistics at a time when the pandemic, and businesses' responses to it, are still dominating economic activity. Despite a rise in layoffs over the last two months as the Omicron wave swept the U.S., the economy appears to have added nearly 1 million jobs in that time.
In addition, wages continued to rise at a rate that suggests a buildup of inflationary pressure, as workers use their growing leverage with employers in a market characterized by staff shortages. Average hourly earnings rose by 0.7% on the month, rather than the 0.5% expected and their strongest increase since April last year. That took the annual rate of earnings growth up to 5.7%.
Even so, the jobless rate rose to 4.0% of the workforce, from 3.9% in December, and average weekly hours worked fell to 34.5 from 34.7, hitting their lowest since July 2020.
The details of the report suggested that at least some of the distortions created by the pandemic over the last two years are easing, with more workers returning to the labor force. The participation rate, which tracks the proportion of working-age people actually in work, rose to 62.2% from 61.9%, its highest level since April 2020.
Paul Donovan, chief economist with UBS Wealth Management, said via Twitter (NYSE:TWTR) that there was a "notable increase in the number of people taking part time jobs alongside full time" ones, a development which he argued could be due to lower-income groups looking to booster their income, having spent their pandemic savings.
Financial markets responded by pricing in more monetary policy tightening from the Federal Reserve. Money market futures fell to imply a 33% chance that the Fed will hike rates by 50 basis points in March, despite a number of comments from Fed officials this week playing down such a dramatic scenario. The interest-rate sensitive 2-Year Treasury note yield leaped another 11 basis points to 1.30%, while the 10-Year Treasury yield rose 9 basis points to 1.91%. The last time the 10-year yield was that high, the coronavirus first identified in Wuhan, China, wasn't even known as Covid-19.