US job growth defeats expectations in January, unemployment rate at 4%

The U.S. economy created far more jobs than expected in January even as raging COVID-19 infections disrupted activity at consumer-facing businesses, pointing to underlying strength in the labor market.

The survey of establishments in the Labor Department’s closely watched employment report on Friday showed nonfarm payrolls increased by 467,000 jobs last month. Data for December was revised higher to show 510,000 jobs created instead of the previously reported 199,000.

Economists polled by Reuters had forecast 150,000 jobs added in January. Estimates ranged from a decrease of 400,000 to a gain of 385,000 jobs.

The labor market resilience could alter expectations that economic growth would slow significantly in the first quarter after robust growth in the fourth quarter.

Economists had been bracing for a disappointment as the government surveyed businesses for payrolls in mid-January, when Omicron infections were peaking.

Data from the Census Bureau’s Household Pulse Survey, published in mid-January, showed 8.8 million people reported not being at work because of coronavirus-related reasons between Dec. 29 and Jan. 10. Its survey of small businesses also showed an increase in establishments reporting large negative impacts from the pandemic between Jan 10 and Jan. 16.

Workers who are out sick or in quarantine and do not get paid during the payrolls survey period are counted as unemployed in the establishment survey even if they still have a job with their companies. Lower-paid hourly workers in industries like healthcare as well as leisure and hospitality, who typically do not have paid sick leave, bore the brunt of the winter wave.

According to the latest government data, paid sick leave was available to 79% of civilian workers in March 2021.

Employment could increase further, with coronavirus infections subsiding. First-time applications for unemployment benefits dropped for a second straight week last week, retreating further from a three-month high touched in mid-January, the government reported on Thursday.

The United States is reporting an average of 354,399 new COVID-19 infections a day, sharply down from the more than 700,000 in mid-January, according to a Reuters analysis of official data.

The unemployment rate was at 4.0% in January. The government introduced new population assumptions, which caused a break in the series. January’s jobless rate and other ratios from the household survey are not directly comparable to December.

Economists and White House officials had urged against reading too much into a weak report. The Federal Reserve is expected to start raising interest rates next month, with economists anticipating as many as seven hikes this year to tame inflation.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Chizu Nomiyama)