The U.S. economy added 517,000 jobs in January 2023, according to newly released government numbers. That’s higher than expected. CEI experts explain what it means going forward – for the economy and for workers.
“Some economists are worried that lower inflation could mean higher employment because slower inflation often means a slower economy. That isn’t always true, as today’s numbers show. If anything, last year’s rapid inflation hurt employment. Real wages weren’t keeping up with inflation, which discouraged many workers.
“Now that inflation is slowing down, it is easier for employers and employees to agree on what a fair wage looks like. Slowing wage growth in nominal terms is not necessarily slow wage growth in real terms. Sure enough, real wage growth began to speed up right when inflation began to slow down in the second half of 2022. That is likely not a coincidence.
“A little bit of stability is encouraging to both employers and employees. This may be contributing to the soft landing we are seeing so far. There will continue to be some hangover effects from Washington’s post-COVID spending and inflation binge. But most other economic fundamentals look good, just as they did when COVID first hit.”
“The stronger than-expected gains from the most recent Department of Labor report show that despite recent headlines focusing on layoffs in the tech sector, employers in the broader economy are still hiring and doing so aggressively. Most employers appear to have hit the limit of what they can do through efficiency and automation and are still short staffed. The gains were broad-based with leisure and hospitality adding 128,000, construction adding 25,000, business services adding 82,000 and retail adding 30,000. Wages increased by 10 cents in the last month for private sector workers and overtime is up marginally. This is still one of the best economies for workers seeking jobs.”
“Despite the creation of more than half a million new jobs across almost all sectors in January, the labor force participation rate did not budge from 62.4 percent. This puzzling reality provides more evidence that there are deeper problems in our labor market hidden under the rosy job report. Jobs mostly went to people who were already looking for work, which means people still aren’t being pulled in off the sidelines. Without policy changes that incentivize and reward work, participation will remain near historical lows.”