[Asia Economy Reporter Jeong Hyunjin] The U.S. labor market is heating up despite the Federal Reserve's (Fed) consecutive interest rate hikes. Last month, nonfarm payrolls exceeded market expectations by nearly three times, and the unemployment rate hit a 53-year low at 3.4%.
According to the employment report released by the U.S. Department of Labor on the 3rd (local time), nonfarm payrolls increased by 517,000 last month. This is double the previous month's increase (260,000) and nearly three times the market forecast of 185,000. It is the largest increase since August last year.
Bloomberg News explained that jobs in leisure and hospitality sectors increased significantly. The growth trend centered around restaurants and bars since September last year also had a major impact this time.
The unemployment rate recorded the lowest level in 53 years since 1969. Last month, the unemployment rate was 3.4%, down from 3.5% in December last year. The initial forecast for January's unemployment rate was 3.6%, expected to rise slightly from the previous month, but it actually fell. The labor force participation rate rose slightly to 62.4% from 62.3% the previous month.
However, wage growth somewhat slowed down. The average hourly wage in January rose by 0.3% month-over-month and 4.4% year-over-year. Considering that the increases were 0.4% and 4.8% respectively in December last year, the growth rate has somewhat decreased. The Wall Street Journal (WSJ) analyzed, "Wage growth is gradually slowing, which means it is becoming easier for employers to hire workers."
The Fed has been trying to cool down the overheated labor market through interest rate hikes. Nevertheless, the labor market remains robust, increasing the likelihood that the tightening mode will continue for the time being.
On the 1st, Fed Chair Jerome Powell said at a press conference following the Federal Open Market Committee (FOMC) regular meeting that although inflation is slowing, it is still in the early stages, and "the labor market remains extremely tight." He stated, "With the lowest unemployment rate in 50 years, very high job openings, and high wage growth, the labor market remains extremely tight. Despite a slowdown in job growth and some easing in nominal wage growth over the past year, the labor market continues to be out of balance."
Elijah Judge, Chief Strategist at Bloomberg Intelligence, evaluated that the stronger-than-expected employment report is likely to convince the market that the Fed will not cut interest rates this year.
Meanwhile, immediately after the employment report was released, U.S. Treasury yields showed an upward trend. The 10-year U.S. Treasury yield rose from the previous closing price of 3.396% to the 3.4% range. The 2-year Treasury yield also increased from the previous close of 4.090% to the 4.2% range.
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