Scorching hot payrolls burn through the winter cold
|Summary
Nonfarm payrolls blew past expectations in January. The 517K increase in employment was nearly triple the Bloomberg consensus for a 188K gain. Seasonal adjustment factors appear to have flattered the headline as smaller-than-usual post-holiday layoffs bolstered the payrolls numbers.
But the unusually few layoffs that translated into such a strong headline gain is indicative of what remains an incredibly strong jobs market, and other details of today's report underscored this strength. Benchmark revisions increased the level of employment over the past couple years and showed stronger hiring momentum heading into 2023. At the same time, the unemployment rate fell to 3.4%, the lowest reading since 1969. Average hourly earnings growth remained solid and registered a 4.6% annualized rate over the past three months.
We suspect members of the FOMC will be cautious in reading too much into the magnitude of January's payroll gain, but the firm pace of average hourly earnings growth and a 53-year low in the unemployment rate should keep a 25 bps rate hike at the March 22 FOMC as the base case and another possible increase in May in play.
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