U.S. jobs boomed in January, unemployment at 3.4%

STORY: The U.S. economy added more than half a million new jobs in January, signaling a labor market that remains robust and resilient in the face of higher interest rates and fears of recession.

The Labor Department on Friday reported the U.S. added 517,000 new jobs last month, and revised December's jobs report higher from 223,000 to 260,000.

Average hourly earnings also climbed, rising three-tenths of a percent in January.

U.S. President Joe Biden on Friday hailed the numbers as a success of his policies to fuel growth while restraining rising prices.

"Put simply, the Biden economic plan is working."

The U.S. unemployment rate fell to 3.4 percent - the lowest level in more than half a century.

But the Bureau of Labor Statistics last month updated the formulas it uses to smooth out the data for regular seasonal fluctuations, and January's figure should not be compared against the 3.5 percent unemployment rate for the month before.

Still, the strength of the U.S. job market could give the Federal Reserve room to continue raising interest rates, as it tries to tamp down rising wages in its effort to curb inflation.

John Leer is chief economist at Morning Consult.

"My sense is that we all knew that the U.S. labor market was very tight right now. And so the expectation prior to today's release was for like, let's say, 185,000 new jobs created, 517 is clearly much stronger. And that gives the Fed some sense, of course, that, you know, workers are going to continue to be added, that wage pressure is likely to remain high. And I think on net, it pushes the Fed to be a little bit more hawkish and likely to keep interest rates higher for longer"

Fed Chair Jerome Powell said this week "the economy can return to 2% inflation without a really significant downturn or a really big increase in unemployment."

Leer sees weaker job growth ahead.

"We have strong job growth right now, elevated inflation, a Fed that is likely to keep interest rates higher for a long period of time. And I think all of that combined is very likely to lead to fairly slow jobs growth later this year.

Government data this week showed there were 11 million job openings at the end of December, with 1.9 openings for every unemployed person.