U.S. job growth blows past estimates despite Omicron surge

U.S. employers extended a hiring spree last month despite a record spike in COVID-19 infections and related business closures, with surging wages adding further pressure on the Federal Reserve to raise interest rates.

U.S. employers extended a hiring spree last month despite a record spike in COVID-19 infections and related business closures, with surging wages adding further pressure on the Federal Reserve to raise interest rates.

Nonfarm payrolls increased 467,000 in January in a broad-based advance that followed substantial upward revisions to the prior two months, a Labor Department report showed Friday. The unemployment rate ticked up to 4 per cent, and average hourly earnings jumped.

The median estimate in a Bloomberg survey of economists called for a 125,000 advance in payrolls, though forecasts ranged widely. A variety of factors including omicron, seasonal adjustment and the way workers who are home sick are factored in make interpreting the January data challenging.

The surprise display of strength suggests the labor market continues to improve, despite the temporary disruption from record-high levels of coronavirus infections and the resulting absenteeism from work. The data further reinforce Fed Chair Jerome Powell’s description last week of the labor market as “strong” and validate the central bank’s intention to raise interest rates in March to combat the highest inflation in nearly 40 years.

Treasury yields surged and the S&P 500 was mixed. Investors began to price in the slight possibility of a sixth quarter-point boost by the end of this year, while continuing to see a March increase as a lock and nudging up the chance of a 50-basis-point jump.