Here's what the Labour Department's jobs report tells us about the state of the economy
Photo: Alexi Rosenfeld/Getty Images The Labor Department on Friday released a blow-out jobs report showing that the economy added about a million new jobs in December and January combined, with the unemployment rate rising a smidge to 4 percent. The numbers not only came in hotter than what economists had anticipated but essentially corrected the record around the perceived hiring slowdown from the Omicron variant. This is a solid report pretty much every way you look at it.
First, the really good news. When Omicron hit its national peak last month, rising to more than 800,000 confirmed cases a day, something unexpected happened in the economy: a larger number of people started looking for a job. This is called the labor-force-participation rate, and it has been one of those metrics that has persistently lagged.
The general picture of the economy here is that the country went on a hiring spree and started to pay more for it than ever before. There were 151,000 new jobs added in the leisure and hospitality industries in January, with the vast majority of those concentrated in restaurants and bars. This is also where wage gains have historically been during the pandemic, with workers securing paychecks that are rising faster than inflation.
What this means for the future, though, is that this roaring economy isn’t likely to last much longer. Standing in its way is the Federal Reserve, and its chair, Jerome Powell, who is preparing to embark on a program to raise interest rates. Wall Street has been predicting as many as seven quarter-point interest-rate hikes this year from the central bank.
The real risk, though, is that a regime of rate hikes won’t just be a mild tempering of the economy. After all, there are more than 10 million open jobs, far more than there are people who are out of work, so anyone who wants one could theoretically get one. The issue is that this report is essentially so good that it gives the Fed the green light to move too far, too fast, and shock the economic system.
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