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Even though people thought the economy would get worse, the number of jobs in the US went up a lot in January.
Last month, employers added 517,000 new jobs, according to the Labor Department.
That was a lot more than anyone expected, and it helped bring the unemployment rate down to 3.4%, the lowest it has been since 1969.
Analysts need help figuring out what’s happening in the world’s largest economy, which is being hurt by rising prices and higher borrowing costs.
This year, the chances of a recession are higher than usual, say many economists. They show numbers that show drops in consumer spending, manufacturing, and home sales in recent months.
A recent poll by the research firm Morning Consult showed that almost half of the people think the economy is already in a downturn or recession.
Even so, the job market has stayed strong, and the gains in January surprised economists who had predicted bad news.
After the report came out, economist and University of Michigan professor Justin Wolfers said on Twitter, “This is a staggering number.”
A director at Moody’s Analytics, Dante DeAntonio, said you should put only a little stock in data from just one month.
His company still thinks that job growth will slow “dramatically” in the next few months, and it warned that the chance of a recession was “uncomfortably high.”
But US President Joe Biden said the report proved that those who said the economy was in bad shape were wrong. His popularity dropped last year as prices went up, and Republicans said it was because of how he planned to spend money.
Most of the hiring in January happened in bars and restaurants, which are still getting back on their feet after losing jobs during the pandemic.
Jobs were lost in some sectors
Only the industries that made cars and those in the tech field lost jobs.
When the US central bank took steps last year to keep consumer prices stable, the cost of borrowing money went up, which hurt these industries.
By raising interest rates, the Federal Reserve hopes to slow down demand and make it easier for prices to go down.
People are worried that the government will force the economy into a painful contraction by raising interest rates when price increases start slowing down. This would make the economy slow down quickly, which could lead to companies cutting jobs.
The head of the Federal Reserve, said this week that he hoped the US central bank could avoid that situation.
But he warned that the Fed was trying to stop inflation and was still worried that the job market was too strong to let price growth stabilize around the bank’s goal of 2%.
A report on Friday said wages went up 4.4% in the year before January.
Last year, pay raises didn’t keep up with the rise in prices, and there are signs that they need to catch up.
When job growth is this strong, it’s hard to see how wage pressures could ease enough, said Seema Shah, chief global strategist at Principal Asset Management. Moreover, when there’s so much exciting economic news, it’s even harder to see the Fed stop raising rates and start thinking about lowering them.
The market will go up and down like a roller coaster as people try to figure out if this is good or bad news. But for now, the US economy is doing fine.
The Fed says it will raise rates less often as inflation goes down.
As part of its efforts to keep prices stable in the largest economy in the world, the US central bank raised interest rates again.
The Federal Reserve said it would raise its key rate by 0.25 percentage points.
After a series of big rate increases last year, this is the smallest increase since March.
But officials said they didn’t think they were done raising rates, despite signs that US price growth is slowing.
After the financial crisis and years of low-interest rates, the world is paying close attention to what the bank does because the US is leading a change.
The Bank of England and the ECB will likely raise their interest rates on Thursday.
It wasn’t a surprise that the Fed raised rates on Wednesday. It raises the bank’s benchmark rate to between 4.5 and 4.75 percent, the highest it has been since 2007.
The Fed hopes to slow down the economy and make it easier for prices to rise by making it more expensive to borrow money.
But the government risks starting a painful recession, in which the economy slows down so much that many people lose their jobs.
Even though the Fed says it will slow down its rate hikes, it is still hard to know what will happen next.
The bank thinks US inflation will drop to about 3% by the end of 2023, but Prof. Dominguez says this prediction “seems quite optimistic.”
Read Also: US economy surpasses growth expectations
For now, the US job market is still strong, and workers are pushing for higher wages, which could increase prices in the future.
China’s recent decision to loosen up on its Covid-19 rules may also pressure the world economy by making more people want to buy things.
Opinions expressed by Texas Today contributors are their own.