The United States economy added a better-than-expected 467,000 jobs last month, despite a wave of workers calling in sick as Omicron infections peaked.
Sometimes economic forecasters are too glum for their own good. That sure was the case on Friday with the release of the closely watched monthly US jobs report.
The United States economy added a robust 467,000 jobs in January, the US Department of Labor said on Friday. That was far, far better than most analysts were expecting and quells fears that the fast-spreading Omicron variant of COVID-19 temporarily dented the labour market recovery in the world’s largest economy.
“The labor market started the year off on a stronger-than-expected note defying expectations that the rapid spread of Omicron would lead to a temporary pullback,” said Oxford Economics chief US economist Kathy Bostjancic in a note to clients.
The US jobs market also closed out 2021 on a stronger footing than first thought. Jobs creation for November and December last year were revised up by a combined 709,000.
The nation’s unemployment rate edged up slightly in January to 4 percent after falling to 3.9 percent in December. But it’s not as bad as it seems at first glance because the number of people either working or actively looking for a job – a metric called the labour force participation rate – increased to 62.2 percent, the highest level since the coronavirus pandemic struck in March 2020.
The bump suggests that workers are moving off the sidelines – a development that is likely to cheer business owners who are struggling to fill a near-record number of job openings and have been sweetening benefits and pay packages to lure scarce job seekers.
That enhanced worker bargaining power was on display in average hourly earnings, which climbed 5.7 percent in December compared to the same period a year ago.
But as earnings go up, it further stokes inflation, which is also being fed by ongoing supply-chain disruptions and shortages of raw materials. That double whammy increases input costs for businesses, and they are increasingly passing on at least a portion of that financial burden to consumers.
That’s why the January jobs report falls at a critical juncture in the nation’s economic recovery.
US inflation is running at its hottest level in nearly 40 years and those higher prices erode purchasing power – undercutting the windfall from fatter paycheques.
Soaring costs for essentials like food, gasoline, and rent are also especially hard on low-income households that are forced to shell out a larger share of their financial resources to cover those basic needs.
Finally, too much inflation is bad for consumer confidence, which is bad for the economy. Because when consumers don’t feel good about their financial fortunes and prospects, it saps their spending mojo – and consumer spending drives some two-thirds of US economic growth.
Cue the Fed
For most of the recovery, the steward of the US economy, the Federal Reserve, has kept interest rates low to encourage jobs creation.
But late last year, with job openings abounding and inflation soaring, the Fed signalled a hard pivot away from job-boosting easy money policies and towards raising borrowing costs to keep a lid on rising prices.
Fed chief Jerome Powell said in January that the Fed will likely start raising interest rates in March. What’s more – he said that there is “quite a bit of room to raise interest rates without threatening the labour market”.
The Fed has a dual mandate to achieve maximum employment while keeping inflation under control. And right now inflation is running far above the Fed’s target rate of 2 percent.
The Fed insists there are no signs yet of a dreaded “wage-price spiral” – that’s when workers keep asking for a raise to keep up with inflation, feeding consumer demand for goods and services, which raises prices further.
If labour force participation continues to increase, it should help calm wage pressures. And Fed policymakers still think inflation will start to moderate later this year.
But the January jobs report is bound to fuel mounting speculation that the Fed could hike rates by as much as half a percentage point in March, or signal a more aggressive tightening cycle ahead.
The US economy shrank 1.6% in the first quarter, adding to recession fears – CNN
Minneapolis (CNN Business)The US economy shrank at a slightly faster rate than previously estimated during the first quarter, the Bureau of Economic Analysis said Wednesday.
The pandemic may have forever altered the economy, Fed Chair Powell says – CNN
(CNN)It’s not yet clear if the US economy will ever return to its pre-pandemic status, Federal Reserve Chairman Jerome Powell said Wednesday at a central banker forum in Portugal.
China's Economy Shows Signs of Improvement as Covid Eases – BNN
(Bloomberg) — China’s economy showed further signs of improvement in June with a strong pickup in services spending as Covid outbreaks and restrictions were gradually eased.
The official manufacturing purchasing managers index rose to 50.2 from 49.6 in May, the National Bureau of Statistics said Thursday, slightly below the median estimate of 50.5 in a Bloomberg survey of economists. It was the first time since February that the index was above 50, indicating expansion in output compared with May.
The non-manufacturing gauge, which measures activity in the construction and services sectors, climbed to 54.7, the highest in more than a year and well above the consensus forecast of 50.5.
China’s CSI 300 Index rose as much as 0.9% while major stock gauges in Asia broadly fell.
Government restrictions to contain Covid outbreaks have gradually eased over the last month. The financial hub Shanghai lifted its two-month lockdown at the start of June by allowing more shops to reopen, more factories to resume production, and for port operation to pick up.
The data suggests “the pace of recovery accelerated as the Covid situation stabilized,” said Peiqian Liu, chief China economist at NatWest Group Plc. There was a “broad based but still soft recovery in both production and new orders,” and the figures show the rebound is still milder compared with the recovery from the Wuhan lockdown in 2020, she said.
Some 19 of the 21 sectors in the service sectors tracked in the survey returned to expansion last month, up from just six in the previous month, according to the NBS. Gauges of sectors previously hit badly by the outbreaks all improved, such as railway transport, air transport, accommodation, catering and entertainment.
The recovery remains fragile though as the country sticks to its Covid Zero strategy, meaning restrictions could be tightened if outbreaks of the highly transmissible omicron variant flare up again. Chinese President Xi Jinping reaffirmed his Covid Zero policy this week, saying it was the most “economic and effective” for the country.
Economists, meanwhile, are holding firm on their gross domestic product growth forecasts for this year. The median projection in a Bloomberg survey for 2022 growth is 4.1%, well below Beijing’s annual target of around 5.5%. Bloomberg’s aggregate index of eight early indicators showed some improvement in June, though the recovery remains muted.
(Updates with additional details)
©2022 Bloomberg L.P.
OnePlus 10T design leaks – TrustedReviews
2022-06-29 | NDAQ:RKLB | Press Release | Rocket Lab USA Inc. – Stockhouse
Get hype for the first images from NASA’s James Webb Space Telescope – Yahoo Movies Canada
Silver investment demand jumped 12% in 2019
Europe kicks off vaccination programs | All media content | DW | 27.12.2020 – Deutsche Welle
Global Media Markets, 2015-2020, 2020-2025F, 2030F – TV and Radio Broadcasting, Film and Music, Information Services, Web Content, Search Portals And Social Media, Print Media, & Cable – GlobeNewswire
Science16 hours ago
Facial Recognition—Now for Seals – Hakai Magazine
Tech24 hours ago
Xiaomi 12S Ultra will have 1-inch Sony IMX989 camera sensor – GSMArena.com news – GSMArena.com
Tech12 hours ago
The Xiaomi 12S Ultra Smartphone Will Use a Full Sony 1-Inch Sensor – PetaPixel
Sports18 hours ago
Just the beginning? Why Canada’s soccer stars could be better yet in 2026
Economy21 hours ago
Sudan’s economy dominated by military interests: Report – Al Jazeera English
Health20 hours ago
Stroke treatment breakthrough found in heart attack drug: Canadian researchers | CTV News – CTV News Calgary
Media21 hours ago
Media Release – June 29, 2022 – Guelph Police – Guelph Police Service
Sports19 hours ago
Returning Serena Williams ousted at Wimbledon after shocking 1st round loss – CBC Sports