Employers added 517,000 jobs in January, the Labor Department said in its monthly payroll report released Friday. The unemployment rate, meanwhile, unexpectedly dropped to 3.4%, the lowest level since 1969.
Job gains were broad-based in January, with leisure and hospitality leading the way in hiring, adding 128,000 new workers. That was followed by employment in professional and business services (82,000), government (74,000), health care (58,000) and retail (30,000).
“The surprisingly, strong across-the-board January employment report shows that labor demand remains too hot for the economy’s own good and will embolden the Fed to raise rates more not less,” said Kathy Bostjancic, the chief economist at Nationwide. “The risks are now that they might need to do more.”
While monthly jobs data is always important, the Fed has been closely watching the reports for signs the labor market is moderating from its frenzied pace as policymakers try to wrestle inflation – which is still running near a 40-year high – back to 2%.