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U.S. employers added a whopping 353,000 jobs in January — far more than expected

LEILA FADEL, HOST:

It's Groundhog Day, and once again, the monthly jobs report has confounded forecasters. This morning, the Labor Department said U.S. employers added a whopping 353,000 jobs last month. That's far more than analysts had expected. The big question now is whether the Federal Reserve will see a shadow in these job numbers and extend our winter of high interest rates. NPR's Scott Horsley joins us now to talk about all this. Scott...

SCOTT HORSLEY, BYLINE: Hi, Leila.

FADEL: How are you? So another big surprise in the jobs report. What does it tell us?

HORSLEY: It tells us the U.S. job market is still cooking. We saw job gains pretty much across the economy last month - 70,000 new jobs in health care, 45,000 jobs in retail. Even construction and manufacturing, which are industries that usually feel the drag of those high interest rates, added jobs in January. And what's more, the jobs numbers for November and December were revised up. The unemployment rate, meanwhile, held steady at 3.7%. It's now been under 4% for two full years. So all in all, we're looking at a very strong job market.

FADEL: So that's good news for workers. But will it be worrisome for the Federal Reserve, which has been keeping interest rates high in an effort to curb inflation?

HORSLEY: Possibly. You know, just a couple of days ago, Fed Chairman Jerome Powell had said we seem to be moving towards a more normal job market after the red hot hiring we saw coming out of the pandemic. Today's stronger than expected job growth may give the central bank some pause. However, what is helping to balance out this very strong demand for workers is also a very healthy supply of workers. A lot of people who had been sidelined by the pandemic have now rejoined the workforce. Powell notes the share of people in their prime working years who are in the job market has bounced back. It was 83.3% last month. And we've also seen a rebound in immigration.

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JEROME POWELL: Those two forces have significantly lowered the temperature in the labor market to what is still a very strong labor market. It's still a good labor market for wages and for finding a job. But it's getting back into balance and that's what we want to see.

HORSLEY: This week, the Fed said if inflation continues to come down, the central bank may be able to start cutting interest rates this year, although probably not right away. Powell said it was doubtful we would see a rate cut at the next Fed meeting in March, and I think it's probably more doubtful after today's jobs report. What's more, market odds of a rate cut in may have also come down after this jobs report. But, you know, a lot can happen in the next three months, so we'll see.

FADEL: So there's less frenzy in the job market. Are workers still getting nice pay raises?

HORSLEY: Yeah, wages are still going up. In fact, average wages in January were up 4.5% from a year ago. We won't see the inflation numbers for January for another 10 days or so. But for the better part of a year now, wages have been going up faster than prices. The good news is productivity is also on the rise, and that makes it easier for employers to offer wage hikes without putting more upward pressure on prices. Productivity in the final months of last year rose by more than 3%.

FADEL: NPR's Scott Horsley. Thanks.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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Leila Fadel
Leila Fadel is a host of Morning Edition, as well as NPR's morning news podcast Up First.
Scott Horsley
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.