The Employment Situation in January

According to today’s jobs report, the economy added 517,000 jobs in January, for an average monthly gain of 356,000 over the past three months. The number of jobs added in January came in well above market expectations. Employment growth in November and December was revised up by a combined 71,000 jobs.

The unemployment rate ticked down to 3.4 percent, the lowest rate since May 1969. Labor force participation was 62.4 percent, a tick above December’s report. Nominal wage growth ticked down to 0.3 percent in January; nominal wages have risen by 4.4 percent over the last year.

1. Average monthly job growth over the last three months was 356,000, a substantial slowdown from the average at the end of 2021 but higher than in recent months.

Job growth in November, December, and January averaged 356,000 jobs per month (Figure 1), an acceleration from the prior three months of August, September, and October but a slowdown from the last three months of 2021. Since monthly numbers can be volatile and subject to revision, the Council of Economic Advisers prefers to focus on the three-month average rather than the data in a single month, as described in a prior CEA blog.

This report also contained the annual benchmark revision, which adjusts the level of jobs previously estimated as of March 2022. That revision added 568,000 jobs to the previously estimated level of jobs in that month.

2. Monthly nominal wage growth ticked down to 0.3 percent in January.

Nominal average hourly earnings growth ticked down to 0.3 percent over the month, following growth of 0.4 percent in December (Figure 2). Three-month average wage growth was 4.6 percent annualized in January, substantially lower than the 6.1 percent average at the end of 2021, but within the range it has been since spring 2022. Year-over-year, nominal wage growth declined to 4.4 percent, the lowest yearly rate since August 2021. We do not have the inflation report for January yet, which will include real wage growth.

3. Labor force participation rates for workers aged 16 and over and prime-age (25 to 54) workers have seen substantial recovery from their pandemic lows.

Labor force participation for workers aged 16 and over was 62.4 percent, matching the pandemic recovery high. Participation for prime-age workers, which is less sensitive to the aging of the population and so is preferred by many economists, was 82.7 percent, nearing its pandemic recovery high. Both measures have seen substantial recovery from their pandemic lows. Overall, the growth in labor force participation has been relatively robust in this recovery compared to past recoveries.

4. The unemployment rate in January was 3.4 percent, the lowest rate since May 1969.

The unemployment rate was 3.4 percent, the lowest rate since May 1969. The broadest measure of underemployment, which includes workers who are out of the labor force but would take a job if offered and workers who are working part-time but would prefer full-time work, was 6.6 percent, a tick above its record low reached in December 2022. (Data for the broadest measure go back to 1994.) Both measures have remained roughly around these low rates since March 2022.

For Black workers, the unemployment rate was 5.4 percent, near its record low of 5.3 percent. (Data for Black workers go back to 1972.) The unemployment rate rose for both Hispanic/Latino and Asian workers, and ticked up for white workers.

Unemployment rates for workers who are American Indian and Alaska Native, Native Hawaiian and Pacific Islander, and of two or more races are not seasonally adjusted. Looking over the last 12 months, the unemployment rates for American Indian and Alaska Native workers and workers of two or more races have declined, while it has increased for Native Hawaiian and Pacific Islander workers, although these data are highly volatile.

5. The number of workers who are short-term unemployed (less than 5 weeks) dropped, while the number of workers who are long-term unemployed (27 weeks or more) functionally held steady.

The number of workers who are short-term unemployed dropped, suggesting that fewer workers are entering unemployment. As a percent of the labor force, the short-term unemployment rate is currently 1.2 percent, near its record low of 1.1 percent. The number of workers who are long-term unemployed has functionally held steady since July 2022. The long-term unemployment rate is 0.7 percent, near the pandemic recovery low reached in December of 0.6 percent. (Data on duration of unemployment go back to 1948.)

As the Administration stresses every month, the monthly employment and unemployment figures can be volatile, and payroll employment estimates can be subject to substantial revision. Therefore, it is important not to read too much into any one monthly report, and it is informative to consider each report in the context of other data as they become available.