Strong Pace of Jobs Additions In January Raised Worries of Higher Rates

Barry Adams
03 Feb, 2023
New York City

Financial markets turned cautious after the U.S. economy added jobs at a surprisingly faster pace. 

The pace of addition was last seen nearly two years ago and jobless rate dropped to a five-decade low. 

Despite the tight labor market conditions, employment participation rate remained weak, making the Federal Reserve's task harder in balancing economic growth while controlling inflation.  

 

U.S. Hirings Surged, Jobless Rate Dropped to 53-year Low 

The U.S. economy added 517,000 net new jobs in January, the strongest gains since July 2020, the Bureau of Labor Statistics reported Friday. 

Net job additions in the non-farm payrolls were not expected to rise above 175,000 according to several economists and surpassed December's 260,000 net gains. 

In a widespread job addition, the leisure and hospitality industry led the expansion with an addition of 128,000 followed by 82,000 gains in professional and business services, 58,000 in healthcare, 30,000 in retail trade and 25,000 in construction. 

Governments at all levels also added 74,000 net new jobs, partially reflecting the return of 48,000 academic workers at the University of California.   

The January report offers critical insight in the labor market as several large tech companies announce substantial layoffs as companies recalibrate business outlook and prepare for economic slowdown. 

January job gains were ahead of the monthly average of 385,000 in 2022, reflecting the latest revisions in data for the last two months of 2022. 

Both the unemployment rate, at 3.4%, and the number of unemployed persons, at 5.7 million, changed little in January. 

The unemployment rate has shown little net movement since early 2022  and dropped to the lowest level since 1969. 

Labor force participation rate edged higher to 62.4%, but still below the pre-pandemic level of 63.6%. 

Wages rose 0.3% in January from the previous month and surged 4.4% from a year ago. 

 

U.S. Indexes In Review 

The S&P 500 index decreased 0.2% to 4,173.08 and the Nasdaq Composite index declined 0.1% to 12,190.85. 

Crude oil inched lower by $2.0 to $73.91 a barrel and natural gas futures for immediate month delivery fell 10 cents to $2.35 a thermal unit. 

The yield on 2-year treasury notes inched higher to 4.27%, 10-year treasury notes edged higher to 3.52% and 30-year treasury bonds to 3.62%. 

 

U.S. Movers 

Alphabet Inc declined 4% to $103.29 after the parent of Google reported a decline in earnings driven by general weakness in advertising revenue and a larger decline in video ads on its popular YouTube platform.

Alphabet Inc said revenue in the December quarter rose 1% to $76 billion and net income plunged 34% to $13.6 billion from $20.6 billion and diluted EPS dropped to $1.05 from $1.53 a year ago.

Amazon.com, Inc dropped 6.3% to $112.91 after the online retailer reported a sharp plunge in earnings partly driven by writing down the value of its stake in the electric vehicle maker Rivian Automotive.

Amazon.com said sales in the fourth quarter increased 9% to $149.2 billion and net income fell to $0.3 billion from $14.3 billion and diluted EPS fell to 3 cents from $1.39 from a year ago.

North America sales increased 13% from a year ago to $315.9 billion and international sales fell 8% to $118.0 billion, or increased 4% excluding  changes in foreign exchange rates.  

AWS segment sales increased 29% from a year ago to $80.1 billion.

Net sales in full-year 2022 increased 9% to $514.0 billion from $469.8 billion in 2021.

Net loss was $2.7 billion in 2022 or $0.27 per diluted share, compared to net income of $33.4 billion, or $3.24 per diluted share in 2021.

Apple Inc declined 1.6% to $148.26 after the computing devices maker reported a rare quarterly revenue decline and fell for the first time since 2019.  

Apple Inc said revenue in the December quarter fell 5% from the previous year to $117.2 billion.

Net income dropped 13.2% to $30 billion from $34.6 billion and diluted EPS fell to $1.88 from $2.10 a year ago.