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The figure not only showed continuous employment growth, following on from 333,000 jobs added in December, but was nearly twice as high than forecasts had predicted at 180,000.
The figure not only demonstrated continuous employment growth, following on from 333,000 jobs added in December, but came in nearly twice as high as the 180,000 forecast.
Professional and businesses services added the most jobs, with 74,000 throughout the month, followed by healthcare with 70,0000 and retail trade with 45,000.
Federal Reserve holds rates steady as Jerome Powell dampens March cut hopes
The unemployment rate remained steady at 3.7% for the third month in a row, with the number of unemployed people unchanged at 6.1 million.
Richard Flynn, managing director at Charles Schwab UK, said the January figures show that demand in the labour market is “higher than expected”, arguing this “may have set alarm bells ringing in the market”.
This is because lower employment figures would imply lower inflationary pressures, he explained, which in turn could pave the way for rate cuts.
Flynn added: “While lower interest rates would surely be welcomed, it is becoming increasingly clear that markets and the economy are coping well with the high rate environment, so investors are perhaps feeling that the need for monetary policy to ease is less urgent.
“Today’s figures may be another factor delaying the Fed’s first rate cut closer to summer, but if the economy maintains its comfortable trajectory, that might not be a bad thing.”
US economic growth beats forecasts at 3.3% but rate cuts uncertainty lingers
Neil Birrell, lead manager of the Premier Miton Diversified funds and Premier Miton Investors CIO, agreed, suggesting today’s data provided a “shock” and proved the US economy is “strong”.
He also dismissed the idea of the Federal Reserve beginning rate cuts in March.
“Any thoughts of recession are off the mark as well for now, and markets will have to adjust towards the Fed’s view of when policy will change,” he added.
Richard Carter, head of fixed interest research at Quilter Cheviot, echoed the sentiment, arguing that any talks of rate cuts in the first half of 2024 are “becoming harder and harder to envisage as the economy just keeps trundling on”.
He continued: “Ultimately, the soft landing narrative is becoming stronger and it appears the Federal Reserve has navigated things well. The inflation warning signs are no longer flashing, but they will still not want any fresh spike to arrive following any move downwards in rates.
“Given how cautious they were at the beginning of the hiking cycle, waiting for more concrete data, it will be similar on the way back down.”
However, Carter noted the recent data may put the Fed on a “collision course” with the US presidential election in November, which is likely to make the central bank’s job “more difficult” the longer it waits, as it “will not want to have a say on the outcome” of the election.