January Jobs Report Commentary from MBA's Mike Fratantoni
The following is MBA SVP and Chief Economist Mike Fratantoni’s reaction to this morning’s U.S. Bureau of Labor Statistics report on employment conditions in January.
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“The pace of job growth had been trending down over the past six months, but January broke that trend. Recent data on unemployment insurance claims have indicated a stronger job market than the string of layoff announcements from the technology and financial sectors would suggest. Job growth of 517,000 in January, and a drop in the unemployment rate to 3.4%, puts an exclamation point on the divergence between measures of economic activity and job market statistics.
“Much of the job growth is concentrated in sectors like leisure and hospitality, which have struggled to fill job openings for much of the past year. The decline in wage growth to 4.4% may be reflecting some of this shift to sectors that typically are lower wage. However, slower wage growth in the service sector is the trend that Federal Reserve officials have been seeking, despite the persistent strength in the job market.
“Beyond the surprising hiring jump in January, employment numbers were revised up for 2022 by about half a million and were marked up for the last two months as well. As strong as we thought the job market was, it was even stronger.
“With the job market this tight, the Federal Reserve and financial markets will remain even more focused on the inflation data. We expect another 25-basis-point increase in the federal funds target in March, but do anticipate that the unemployment rate, which does tend to be a lagging indicator, will increase through the course of the year.”