The country's economy created more jobs than what was predicted in the previous month. This is despite the disruptions to the consumer-facing organizations because of a sudden increase in the coronavirus cases because of the Omicron variant. It shows the economy's underlying strength that should allow the expansion as the Federal Reserve looks to increase the interest rates. The closely scrutinized unemployment rate report by the Labor Department shows that more than seven hundred thousand jobs were created in the previous months than what had been forecasted by experts. The wage gains also grew in the previous month, and the labor pool expanded. The upbeat nature of the unemployment rate report ended a long period of anxiety among the White House officials and the experts who had tried to prepare the country for an average payrolls number.
According to the survey of establishments, the nonfarm payrolls grew by more than four hundred thousand jobs in the previous month. The experts had predicted that more than a hundred thousand jobs would be added in the previous month. The experts had given a range of an increase or decrease of about four hundred thousand jobs in the latest unemployment rate report. Chris Low, the chief economist at FHN Financial, said, "This is a strong jobs report. The odds of quelling inflation without a recession look better today than yesterday." Federal Reserve Chairman Jerome Powell said, "The labor market has made remarkable progress and by many measures is very strong. Over time there are good reasons to expect further improvements in participation and employment."
Unemployment Rate Report is Much Higher Than the Pre-Pandemic Low
Some of the wide growth in the payrolls show the low layoffs after the hiring season that followed the holidays. There were nearly eleven million job openings at the end of a couple of months ago. Though the decrease in the actual employment in the previous month was in line with the years before that, there were major differences at the level of the industries. The Federal Government also said that nearly four hundred thousand more jobs were created in one year to March of the previous year than what was previously reported. The previous month completed the first year in office for Joe Biden, which saw the addition of more than six million jobs. Despite the robust economy, the president's popularity is decreasing due to the high inflation. The labor market's resilience could change the expectations that the economic growth could slow by a great margin at the beginning of this year. This is because consumer spending was not too high in December of the previous year.
The economy experienced a growth rate of nearly seven percent in the last quarter of the previous year. The growth estimates for the beginning of the year are below a speed of three percent. Robust employment growth, accompanied by the biggest growth in wages since May a couple of years ago, paves the way for the Federal Reserve to increase the interest rates in the following month by more than twenty basis points to control the high inflation. Experts say there may be more than six rate hikes this year alone. The stocks on Wall Street were trading higher. The dollar was going steady against a basket of currencies. The prices of US Treasuries declined. President Biden said, "We still have a lot of work to do. Making sure every American has a job it's a great start, but it's not the end." Cliff Hodge, chief investment officer at Cornerstone Wealth, said, "The report is unequivocally good for the economy, but not for markets as the strength in the numbers presents another data point which supports more aggressively hawkish Fed action."
Andrew Hunter, the senior US economist for Capital Economics, said, "The 467,000 gain in nonfarm payrolls in January is even stronger than it looks, as it came despite the spike in absenteeism driven by the Omicron virus wave and was accompanied by significant upward revisions to the gains over a preceding couple of months. The headline gain appears to make a mockery of our fears that Omicron would weigh heavily on the payrolls figures, with leisure and hospitality employment rising by a solid 151,000. Despite millions of workers having to self-isolate, there were also strong gains in professional and business services, retail and transportation, and warehousing." Seema Shah, the chief strategist of Principal Global Investors, said, "The case for near-term tightening has just been further reinforced and, inevitably, there will be speculation around a potential 50bps move in March. Yet, investors should really find comfort in the report. The economy is still hot and is strong enough to digest the policy tightening this year."
Unemployment Rate Report: Labor Pool Expands
Experts had predicted a weak unemployment rate report because the Federal Government surveyed organizations for payrolls in the middle of the previous month. This was when the coronavirus infections driven by the Omicron variant were at their absolute peak. The Labor Department stated that a record three million citizens who had a job were absent during the survey week due to sickness. The workers who were in quarantine or were out sick and did not get paid during the payrolls survey period were counted as unemployed in the survey even if they still held a job. The lower-paid hourly workers in segments such as healthcare, hospitality, and leisure bore the main brunt of this wave of coronavirus infections. According to the data given by the government, the paid sick leaves were not available to more than twenty percent of the civilian workers in March of the previous year.
The hospitality and leisure industry added more than one hundred and fifty thousand jobs in the previous month. Healthcare employment grew by nearly twenty thousand jobs. The manufacturing payrolls grew by more than twelve thousand jobs. But the construction payrolls decreased by more than four thousand jobs. This was mainly because of the very cold temperatures. The payrolls of the Federal Government grew by more than twenty thousand jobs. Employment can experience further growth as coronavirus infections continue to decline nationwide. In the latest report, the first-time applications for unemployment aid also declined for another consecutive week. The nation is reporting an average of more than three hundred thousand new coronavirus infections daily.
This is a sharp decrease from the more than six hundred thousand cases in the middle of the previous month. This is according to an analysis of the officially released data. The Federal Government also introduced some new population estimates for the survey of the households, from which the unemployment rate is taken. The latest assumptions did not have a major effect on the unemployment rate. It increased to four percent in December. The labor force participation rate is the ratio of working-age citizens who have employment or are seeking one. It grew to more than sixty percent because of the modifications in the composition of the population. The workforce grew by more than a million people in the previous month. The employment-to-population ratio increased to nearly sixty percent in December.
Other details for the survey of households were robust. The employment grew by one million jobs. The survey takes those citizens as employed who have a job. This is regardless of whether they have been paid during the survey week. It does not matter whether they were absent from their jobs because of any reasons such as illness. A wider measure of employment includes the citizens who want a job but have given up seeking and those working part-time because they cannot get a full-time job. The rate of these people declined to seven percent. This was the lowest level since February of two years ago. With several lower hourly paid employees at home, the wage growth has increased. The average hourly earnings grew by 0.8%. This grew the annual increase to 5.6%. It was the biggest growth rate since May two years ago. But the increase in cases of the Omicron variant cut the average workweek to less than thirty-five hours. This represented the shortest work week since April a couple of years ago. Noah Williams, an adjunct at the Manhattan Institute, said, "All in all, the US economy appears to be on a strong footing."
Many have said that the unemployment rate report would not perfect the underlying strength in the present labor market. This is because of the Omicron-related disruptions that have taken place in the economy. Still, the unemployment rate report forms a very important document for the analysis of the state of the nation's economy.