(CNSNews.com) - The first employment report of 2023 shows robust strength in the labor market, as the Federal Reserve continues to raise interest rates.
The Labor Department's Bureau of Labor Statistics says a whopping 517,000 non-farm jobs were created in January, way above estimates of 183,000.
"Job growth was widespread, led by gains in leisure and hospitality (+128,000), professional and business services (+82,000), and health care (+58,000). Employment also increased in government (+74,000), partially reflecting the return of workers from a strike," BLS said.
In another headline number, the unemployment rate dropped a tenth of a point to 3.4 percent -- after remaining in the 3.5-3.7 percent range since March.
Notably, the number of employed Americans increased by 894,000 to 160,138,000 in January -- breaking last month's record of 159,244,000. At the same time, the number of unemployed -- no job but looking -- dropped by 28,000, and the combination of the two pushed the jobless rate down.
In January, the civilian non-institutional population in the United States was 265,962,000. That included all people 16 and older who did not live in an institution, such as a prison, nursing home or long-term care facility.
Of that civilian non-institutional population, 165,832,000 were participating in the labor force, meaning they were either employed or unemployed -- they either had a job or were actively looking for one during the last month. This resulted in a labor force participation rate of 62.4 percent in January -- compared with 62.3 percent in December and 62.2 percent in November.
The participation rate was 61.4 percent when Joe Biden took office amid the COVID pandemic. Today's number, 62.4 percent, is now just one point below the Trump-era high of 63.4 percent recorded in February 2020, just before the COVID-prompted shutdowns.
As BLS explains it, the participation rate -- the higher the better -- is an important labor market measure because it represents the relative amount of labor resources available for the production of goods and services.
After rising for more than three decades, the overall labor force participation rate peaked in early 2000 and subsequently trended down. In recent years, the retirement of the baby-boom population has contributed to the decline in the overall participation rate.
Speaking of retirees, one number went in the wrong direction last month: The number of people counted as not in the labor force increased by 252,000, settling at 100,130,000.
People who are not in the labor force have no job and are not looking for one. This group includes retirees, students, caregivers, and others who have dropped out of the labor force at a time when jobs go begging.
Among the major worker groups, the unemployment rates for adult men (3.2 percent), adult women (3.1 percent), teenagers (10.3 percent), Whites (3.1 percent), Blacks (5.4 percent), Asians (2.8 percent), and Hispanics (4.5 percent) showed little change in January.
In January, average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents, or 0.3 percent, to $33.03. Over the past 12 months, average hourly earnings have increased by 4.4 percent, which means wages are not keeping up with inflation.
The change in total nonfarm payroll employment for November was revised up by 34,000, from +256,000 to +290,000, and the change for December was revised up by 37,000, from +223,000 to +260,000. With these revisions, employment gains in November and December combined were 71,000 higher than previously reported.
Labor market remains tight
At a news conference this week, Federal Reserve Chairman Jerome Powell noted that "the labor market remains extremely tight, with the unemployment rate at a 50-year low, job vacancies still very high, and wage growth elevated.”
He noted that the demand for labor substantially exceeds the supply of available workers, and the labor force participation rate has changed little from a year ago.
The Fed's concern is inflation, which remains well above its goal of 2 percent.
In an effort to reduce inflation, the Fed this week announced another interest rate hike, this time only 25 basis points. The Fed has now raised interest rates by four-and-a-half percentage points over the past year.
"We continue to anticipate that ongoing increases will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time," Powell said.
Higher interest rates raise borrowing costs for both consumers and businesses, which tend to reduce spending and investment as a result. That normally results in a higher unemployment rate, as businesses cut back.
The stock market dropped at the outset on Friday, as investors anticipate another round of interest rate hikes, given the continuing strength in the job market.