WASHINGTON (AP) — U.S. employers shrugged off last month’s partial government shutdown and engaged in a burst of hiring in January, adding 304,000 jobs, the most in nearly a year.
The healthy gain the government reported Friday illustrated the job market’s durability nearly a decade into the economic expansion. The U.S. has now added jobs for 100 straight months, the longest such period on record.
The unemployment rate did rise in January to 4 percent from 3.9 percent, but mostly for a technical reason: Roughly 175,000 federal workers were counted as temporarily unemployed last month because of the shutdown.
The government on Friday also sharply revised down its estimate of job growth in December, to 222,000 from a previously estimated 312,000. Still, hiring has accelerated since last summer, a development that has surprised economists because hiring typically slows when unemployment is so low.
The ongoing demand for workers is leading some businesses to offer higher pay to attract and keep staff. Average hourly wages rose 3.2 percent in January from a year earlier. That’s just below the annual gain of 3.3 percent in December, which matched October and November for the fastest increase since April 2009.
The strong job market is also encouraging more people who weren’t working to begin looking. The proportion of Americans who either have a job or are seeking one — which had been unusually low since the recession ended a decade ago — reached 63.2 percent in January, the highest level in more than five years.
The 35-day government shutdown caused 800,000 workers to miss two paychecks. But because these workers will eventually receive back pay, they were counted as employed in the survey of businesses that produces the monthly job gain.
But in a separate survey of households that’s used to calculate the unemployment rate, many of these people were counted as temporarily jobless. That’s a key reason why the unemployment rate rose despite the healthy job gain.
Most economists have forecast that the shutdown will likely slow economic growth for the first three months of this year. But some say that even businesses that lost income from the shutdown likely held onto their staffs, knowing that the shutdown would only be temporary.
Friday’s solid jobs report provided a dose of reassurance that the economy remains mostly healthy and likely to shake off any effects of the shutdown. The nonpartisan Congressional Budget Office estimates that the shutdown slowed annual growth for the January-March quarter by about 0.4 percentage point, to a rate of 2.1 percent, though that loss should lead to a bounce-back later this year.
The main reason for the temporary economic loss this quarter is that the thousands of government workers who missed two paychecks slowed their spending. The government itself also spent less. In addition, many businesses across the country lost income. Tourists cut back on visits to national parks, for example, thereby hurting nearby restaurants and hotels.
Yet with unemployment so low and many companies struggling to fill jobs, layoffs might not have been widespread.
The partial government shutdown has delayed the release of a range of government data about the economy, including statistics on housing, factory orders, and fourth-quarter growth.
The reports that have been released have been mixed. The Federal Reserve’s industrial production report showed that manufacturing output rose in December by the most in nearly a year, boosted by auto production.
But consumer confidence fell in January for a third straight month as Americans’ optimism dimmed amid the shutdown and sharp drops in the stock market. Falling confidence can cause consumers to restrain their spending, though economists note that confidence typically returns quickly after shutdowns end.
The housing market has slumped as mortgage rates have increased. Sales of existing homes plunged in December and fell 3.1 percent in 2018 from the previous year. Mortgage rates have fallen back after nearly touching 5 percent last year, but the number of Americans who signed contracts to buy homes still declined in December.
China’s economy is decelerating sharply, the United Kingdom is struggling to negotiate its exit from the European Union, and Italy’s economy has entered recession, exacerbating fears that slower global growth will cut into U.S. exports.
Fed Chairman Jerome Powell this week cited the weaker global economy as a key reason why the central bank will be “patient” before it raises its benchmark interest rate again. That was a sharp turnaround from January, when Fed policymakers forecast two additional hikes for this year.