Strong Jobs Report Points to March Rate Hike

February 4, 2022

The U.S. workforce grew at a rapid pace in January, despite concerns that the Omicron variant would slow hiring.

The economy added 467,000 jobs last month, according to the Labor Department. Job growth was also much more robust at the end of last year than previously thought, with November and December combined seeing an upward revision of more than 700.000 jobs. 

The unemployment edged slightly higher in January to 4% from 3.9% in December as more people entered the workforce. The labor-force participation rate, which tracks the portion of the population that is working or actively seeking a job, rose to 62.2% last month, the highest level since the pandemic began.

The strong report keeps the Federal Reserve on track to lift interest rates next month and increases the chances that we will see additional increases at the Fed’s May and June meetings. The Fed had previously signaled that they would look past January’s jobs report, anticipating a possible slowdown in hiring due to the Omicron variant.

Now, some traders are betting that Fed will kick off its interest-rate hike with the steepest increase in two decades by raising rates a half-percentage point rather than the typical quarter-point increase. In recent days, Fed officials have downplayed speculation that would raise rates by a half-percentage point, but it remains to be seen how a stronger-than-expected jobs report will change their thinking.

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