US payrolls surprise with surge as jobless rate hits 53-year low

Treasury yields surged while the S&P 500 index futures tumbled and the dollar rose. Swaps traders boosted where they see the peak of the Fed’s hiking cycle to nearly 5 percent around midyear.

Hiring was broad-based across sectors, led by leisure and hospitality, professional and business services and health care.

The figures showcase the resilience of the job market despite rising borrowing costs, a pullback in consumer demand and an overall uncertain economic outlook. Demand for workers continues to outpace supply, threatening to keep wage growth strong and fan inflation further.

That’s been a key frustration for the Fed, outlined by Chair Jerome Powell on Wednesday after the central bank slowed its pace of interest-rate hikes to a quarter point. Even so, Powell expressed optimism that officials can still pull off a so-called soft landing, in which they quell inflation without putting millions of people out of work.

In order to do so, the Fed has said it’s key to ease wage gains. The jobs report showed average hourly earnings rose 0.3 percent from December and up 4.4 percent from a year earlier, and the prior month was revised higher. At the same time, the average workweek increased to 34.7.

Other measures have shown wage growth moderating, like the employment cost index and unit labor costs out earlier this week.

“The sector does face challenges relative to capacity and talent and the record low unemployment. However, we continue to see and experience strong and consistent overall applicant flow to support our store hiring with the typical seasonality,” said Frank Britt, chief reinvention officer at Starbucks Corp. on February 2 earnings call

“We see continued labour pressure with different market dynamics impacting hiring and increasing wages for certain roles primarily in our manufacturing organisation,” said Tom Polen, CEO of Becton Dickinson and Co. on February 2 earnings call.

“We’re not planning layoffs. We are limiting our hiring to only the most strategically important role and we’ll use attrition to help manage overall headcount,” said Mary Barra, CEO of General Motors Co on January 31 earnings call

“We’ve had no trouble hiring people. None," said David Calhoun, CEO of Boeing Co. on January 25 earnings call.

How long interest rates stay elevated depends in large part on the trajectory of hiring and wage growth. Job openings unexpectedly surged in December and applications for unemployment benefits remain historically low — a testament to the labor market’s enduring strength, but Powell hinted that could come undone as the Fed keeps working to cool price pressures.

The labor force participation rate — the share of the population that is working or looking for work — climbed to 62.4 percent, and the rate for workers ages 25-54 also increased.

Friday’s report included an annual update to the population controls used in the household survey data, which means the participation and unemployment figures aren’t directly comparable to the previous month.