Job growth within the United States greatly exceeded expectations in the month of January. The estimate for the month was 185,000 which was only about half of the actual 353,000 nonfarm payroll additions that were seen over the course of the month. The unemployment rate also stayed at 3.7% which was lower than the 3.8% estimate. Other metrics such as average hourly earnings and year-over-year wage also increased more than expected.
The report also showed the job increase in December was 333,000 which is higher than originally reported. The combination of increased job growth and increased rate of wage gains is now expected to delay the Fed’s interest rate cuts, the latest estimate is that there is an 80% chance the Fed will not lower interest rates in March.
Across the economy, GDP growth was seen that went against the predictions of a recession. All of these factors create a very complex situation for the Fed when it comes to monetary policy decisions in the near future. The Fed does plan to cut interest rates soon, however not without further indications of cooling inflation, Chair Jerome Powell acknowledged the Fed’s concerns about the impact inflation has on consumers, particularly those of lower incomes. Recent data on inflations shows that core inflation is at 2.9%, close to the Fed’s goal of 2%, however the Atlanta Fed’s measure of “sticky” inflation still remains up at 4.6%.
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With elections coming up, the Biden administration would need the economy to continue to create jobs along with keeping inflation low. The crisis in the middle east is something which may derail all the economies specially the US economy if it continues to directly engage with terrorist groups.
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