US President Joe Biden used an unexpected rise in employment last month to tout the resilience of the US recovery and boost waning public confidence in his handling of the economy.
“The job-creation machine in the United States is going stronger than ever,” Biden said from the White House on Friday after data showed the US economy added 467,000 jobs last month despite ramping up of Omicron. “[It’s] fueling a strong recovery and opportunity for hard-working women and men across this great country. America is back to work.
The surprise increase in payrolls defied forecasts by economists polled by Bloomberg, who had predicted job gains of 150,000.
In addition to January’s jump in payrolls, there were significant upward revisions to data from previous months, with the Bureau of Labor Statistics underestimating the number of jobs created by around 700,000 in November and December.
The monthly revisions of 398,000 for November and 311,000 for December were each higher than the largest upward revision posted in April 1981, on a seasonally adjusted basis.
The strong data, which also showed wage growth rising more than expected, will come as relief to a White House that had warned that job growth could be temporarily hit by the jump in Covid-19 infections. This will fuel expectations that the Federal Reserve will act more aggressively than expected to tighten monetary policy to stamp out inflation.
The jobless rate climbed to 4% despite strong increases, from 3.9% previously.
US government bonds sold off sharply after Friday’s jobs report, pushing Treasury yields to their highest level since the start of the pandemic. The fall in the price of debt, which moves inversely to yields, also increases the pressure on the central bank to fight inflation.
The biggest increases occurred on the shorter maturities, suggesting that investors were betting that this would give the Fed more ammunition to raise interest rates. The 30-year real rate rose above zero for the first time since June 2020.
The BLS data on Friday was collected during Omicron’s worst surge in the United States, which fueled a record number of Covid-19 cases, hospital admissions and deaths.
The White House has touted the robust job market recovery as one of Biden’s most significant achievements in his first year in office, which has otherwise been beset by legislative setbacks.
Despite the passage of a bipartisan infrastructure bill and a major fiscal stimulus bill, his landmark $1.75 billion spending plan to build back better has stalled in Congress.
But Biden on Friday touted recent announcements by Intel and General Motors to open manufacturing plants in industrial states such as Ohio and Michigan as proof that his plans were working. “These announcements are the drumbeat of a resurgence in employment unlike anything we’ve seen in our history – and it didn’t happen by chance,” he said.
Before the winter surge of coronavirus infections, employers struggled to fill their ranks as fears of catching the virus and childcare issues deterred many people from participating in the workforce.
The number of job openings has increased accordingly, with more than 10 million reported in the last month of 2021. This translates to 1.7 job openings for every unemployed person, the highest since the US government began collecting data two decades ago.
Some workers have sought to capitalize on the demand for new hires and quit their jobs in search of better paying positions. A total of 4.3 million Americans quit smoking in December, down from November’s record high of 4.5 million.
Labor costs in the United States have, in turn, risen as employers raise wages and benefits to compete for talent. Hourly earnings rose 5.7% last month from a year earlier and 0.7% from December, a bigger jump than expected.
The Fed is charting the course for its first interest rate hike since 2018 at its next policy meeting in March.
High inflation forced the central bank to reduce its monetary policy support much faster than expected. Senior officials also left the door open for a series of more aggressive interest rate hikes this year or even a half-percentage-point rate hike, as opposed to the quarter-point increases that had become the norm.
After Friday’s data, the number of interest rate hikes priced in by the futures market rose to more than five by the end of 2022.
Additional reporting by Adam Samson