I said last week, the U.S. economy has done it again with stronger than predicted fourth quarter GDP growth. This time it’s another record employment gain that will shock most economists and professional prognosticators to their roots.
Total nonfarm payroll employment rose by 517,000 in January, and the unemployment rate dropped to 3.4 percent, the U.S. Bureau of Labor Statistics reported today. It was double the estimates of job growth for January; whereas just 223,000 nonfarm payroll jobs were created in December.
President Biden gave a short announcement this morning that a total 12 million jobs were created in his first two years in office, also a record. It’s now looking like we should anticipate a record year of recovery rather than worry about an incipient recession, with economic growth continuing as the $trillions in government spending over the past two years gets put into a more productive economy.
“Job growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care. Employment also increased in government, partially reflecting the return of workers from a strike,” said the BLS.
In fact, all sectors had job growth except for the information services. Is Silicon Valley cutting jobs because its revenues are shrinking? Apple, Google, Microsoft have all announced layoffs.
The drop from 3.5 percent to 3.4 percent unemployment was the lowest level since 1969 and the number of hours people work jumped 0.3 hours to 34.7 hours, matching the highest level in a year.
Why wouldn’t this be with a five-year allocation of $550 billion in federal investments in America’s infrastructure to upgrade highways and major roads, bridges, airports, ports, and water systems?
Additional investments cover expansions and improvements to the nation’s broadband access, public transportation systems, and energy grid infrastructure, as I said last week, all boosters to economic growth.
The fall in wage inflation will upset the Fed most, since the report showed that average annual hourly wage growth had dropped to 4.4 percent. I.e., it is falling with a stronger job market.
So, inflation isn’t endangering job growth; the opposite is happening. The most important figure in the Q4 GDP report was the inflation rate rose at an annual 3.2 percent pace in Q4, falling from a 4.3 percent advance in the prior three-month period.
The so-called inflation deflator used in the Bureau of Economic Analysis that measures the aggregate prices for all goods and services transacted domestically signals inflation will continue to decline. So why shouldn’t we be hopeful that 2023 might be a better year for Americans?
The fastest job growth was in sectors that most benefit the public—Education & Health, Leisure/Hospitality, Professional/Business, and Government.
In the face of what looks like a rising prosperity for all, Does the Fed dare to raise interest rates much further?
Harlan Green © 2023
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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