January Jobs - Upside Surprise

Payroll additions surprise positively – Highlighting labor market strength and emboldening Fed plans.  S. job growth exceeded all forecasts and defied Omicron headwinds in January.  Following its meeting last week, the FED noted the impact of the Omicron variant on COVID-sensitive sectors like travel, but predicted a short wave of infection and, as a result, muted economic impact.  That is consistent with our evaluation of how these dynamics are playing out.  Weekly case counts spiked to five and six million in the middle of January, but have already started to taper off.  At the same time weekly jobless claims that rose along with case counts have also trended lower entering February.  Today’s report can only reinforce the Fed’s characterization of the labor market as “strong” and not only validate, but embolden policymakers intentions to raise interest rates in March in an effort to combat elevated inflation levels.

467K payrolls added in January – Well above forecast despite omicron headwinds.  The U.S. labor market added 467K jobs in January, and December numbers were revised significantly higher to 510K (from +199K originally reported).  Forecasts ranged from -400K to +250K with a median of +125K so today’s outcome widely exceeded all estimates.  Job gains were broad based, but led by leisure & hospitality (+151K), professional & business services (+86K), retail trade (+61K), and transportation and warehousing (+54K).  Strong payroll additions came despite headwinds from the omicron variant.

0% unemployment rate – higher but for good reason.  The U.S. unemployment rate increased 0.1% to 4.0% in January.  Forecasts ranged from 3.7% to 4.2% with a median of 3.9%.  Higher unemployment reflects increased labor force participation as more americans came off the sidelines and began looking for work.  The labor force participation rate increased from 61.9% to 62.2% – topping 62% for the first time since the onset of the pandemic.  Hourly wages rose 0.7% compared to December and 5.7% compared to January a year ago.