Economic forecasters think hiring slowed a little bit in January

STEVE INSKEEP, HOST:

Looking ahead to this morning's jobs report, an economist said to expect the unexpected. And he was right. We got it. So in a sense, the unexpected was expected. But in any case, a monthly snapshot from the Labor Department shows U.S. employers added 517,000 jobs in January, which is far more than expected, and the unemployment rate fell to 3.4%, the lowest level since 1969 - in a different century. NPR's Scott Horsley joins us now. Scott, good morning.

SCOTT HORSLEY, BYLINE: Good morning, Steve.

INSKEEP: I guess we should be clear. Sometimes these numbers are revised, sometimes a lot. But these are the numbers we have today, and they are dramatic. What happened?

HORSLEY: Yeah, they show the job market really ate its Wheaties last month. There was lots of hiring in January in bars and restaurants and also in health care. Construction companies added 25,000 jobs last month, even though bad winter weather was plaguing much of the country during the week the survey was done. Even factories added 19,000 jobs, which is odd when we know that factory orders have been on the decline for months now. Tim Fiore conducts a monthly survey of factory managers for the Institute for Supply Management. He thinks factories just want to be ready for a rebound in business that they think is coming later this year.

TIM FIORE: I think what has happened is that companies have decided, let's not lay them off; it's going to be too hard to get them back, and we're going to miss the upside in the second half.

HORSLEY: January's job gains were much stronger than forecast. But, you know, this is not a fluke. Job growth for November and December was also revised up by a total of 71,000 jobs.

INSKEEP: I really appreciate and am interested to hear of factory owners who were adding people or retaining people rather than laying off because it is layoffs that have made headlines in high-profile industries, like media and so forth, in recent weeks. What kind of toll are those layoffs taking on the job market, if any?

HORSLEY: This morning's report suggests they're not taking much of a toll on the macro job market at all. Obviously, when you see big companies like Google and Amazon laying off thousands of workers, it does get headlines, and it's certainly a hardship for the affected workers themselves. But overall, layoffs are still very rare in this job market.

INSKEEP: Does that mean that wages are continuing to go up?

HORSLEY: They are. Wages are climbing, although not as fast as they had been. In January, average wages were up 4.4% from a year ago. That's a little bit smaller annual increase than we saw in December. Of course, workers like getting bigger paychecks, but the Federal Reserve is concerned that if wages climb too rapidly, that could put more upward pressure on prices and make it harder for the Fed to get inflation under control. Fed Chairman Jerome Powell said this week he's glad to see a modest slowdown in wage gains, but there's still a ways to go.

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JEROME POWELL: My own view would be that you're not going to have a sustainable return to 2% inflation without a better balance in the labor market.

HORSLEY: Right now Powell thinks the job market is out of balance, with employers wanting more workers than they're able to hire, even with these rising wages.

INSKEEP: So the low unemployment rate is bad news from Powell's perspective. But how does all of this compare - how does this add to the picture of the last couple of years of the economy?

HORSLEY: Well, monthly hiring certainly downshifted, but it's still really strong. We got an annual revision this morning that shows hiring was even stronger in the 12 months leading up to last March than initially reported. Over the last two years, employers have added more than 12 million jobs as the country refilled the pandemic hole and then some. And I expect you'll hear more about that jobs track record when President Biden gives his State of the Union speech next week.

INSKEEP: These numbers could change, but the most recent revision rose them up. Scott, thanks so much.

HORSLEY: You're welcome.

INSKEEP: NPR's Scott Horsley. Transcript provided by NPR, Copyright NPR.