US jobs total surges by over half a million in January

The US economy generated more than half a million new jobs last month, taking unemployment to its lowest for decades despite the Federal Reserve’s bid to cool the economy to fight inflation.

US payrolls increased by 517,000 for January, nearly double December’s total and far more than the consensus forecast of 185,000. The country’s unemployment rate, at 3.4 per cent, is now the lowest for 53 years.

The figures, which ended a sequence of five months in which job growth declined, led to a bond sell-off as investors reassessed whether the Fed will keep interest rates high for longer to bring inflation down.

“Today’s data point to a labour market that is strengthening, not a labour market that is weakening,” said Eric Winograd, chief US economist at AllianceBernstein.

The Fed has already warned investors that they are wrong to expect interest rate cuts soon, even as it shifted this week to a 0.25 percentage point increase — lower than 2022’s hikes of 0.5 and 0.75 points.

“In order [for the Fed] to cut rates over the summer, as the market is pricing, you not only need to get inflation down but you need to have the labour market to cool off as well,” Winograd added.

The central bank still hopes it will be able to bring inflation down to its 2 per cent target without causing a severe disruption to the jobs market in the world’s biggest economy.

But the extent to which January hirings outpaced the forecast led investors to sell the two-year Treasury, which tends to track interest rate expectations. The yield rose 0.14 percentage points to 4.23 per cent — highest since mid-January.

The S&P 500 slipped 0.2 per cent by lunchtime in New York, trimming earlier losses.

The Bureau of Labor Statistics data also showed that average…