United States: Labor market is hitting on all cylinders in January

U.S. employers added the most workers in four months, while more people are joining the workforce. In January, non-farm payrolls grew by 227,000 jobs. The result followed December’s upwardly revised increase of 157,000 jobs (previously reported: +156,000), marking the strongest gain since October. January’s increase also overshot the 180,000 increase the markets had expected and the data represent the final figures of the Obama era.

The jobless rate inched up from 4.7% in December to 4.8% in January. Although the unemployment rate was slightly higher in January than in December, this was due to more people joining the workforce. The labor participation rate inched up from 62.7% in December to 62.9% in January.

While analysts expect job creation to slow as the economy nears full employment, President Donald Trump has promised to bring more people back into the labor market and boost wages through tax cuts, infrastructure spending and fewer regulations.

FocusEconomics Consensus Forecast panelists expect unemployment to continue falling and average 4.6% this year, which is down 0.1 percentage points from last month’s forecast. For 2018, the panel expects the unemployment rate to drop further to 4.5%.