The total number of jobs in the US increased by more than half a million in January

The US economy added more than half a million new jobs last month, pushing unemployment to its lowest level in decades despite attempts by the Federal Reserve to cool the economy to fight inflation.

US payrolls rose by 517,000 for January, nearly double the December total and nearly triple the consensus forecast of 185,000. The country’s unemployment rate, at 3.4 percent, is now the lowest it has been in 53 years.

The figures, which ended a five-month streak of declining job growth, led to a selloff in bonds as investors reassessed whether the Fed would keep interest rates high for longer to curb inflation.

“Today’s data points to a strengthening labor market, not a weakening labor market,” said Eric Winograd, chief U.S. economist at AllianceBernstein.

The Fed has already warned investors that they were wrong to expect a rate cut soon, though this week they shifted to a 0.25 percentage point hike — lower than 2022 hikes of 0.5 and 0.75 points.

“Alright [for the Fed] to cut rates over the summer, as the market forms prices, not only do you need to reduce inflation, but you also need to cool the labor market,” Winograd added.

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The central bank remains hopeful that it will manage to lower inflation to its target of 2 percent without causing serious disruption to the labor market in the world’s largest economy.

But the degree to which employment in January beat forecasts prompted investors to sell two-year Treasuries, which track interest rate expectations. The yield rose 0.14 percentage points to 4.23 percent — the highest since mid-January.

The S&P 500 slipped 0.2 percent by lunchtime in New York, paring earlier losses.

Data from the Bureau of Labor Statistics also showed that average hourly wages rose at an annual rate of 4.4 percent.

The BLS said January’s job gains were “widespread,” with the largest increase in the leisure and hospitality sector at 128,000 jobs, while employment also rose in professional services, health care and government jobs.

“A strong 517,000 rise in nonfarm payrolls in January means that, despite most leading recession indicators flashing red, the economy is clearly not as close to recession as we suspected,” said Andrew Hunter of Capital Economics.

The BLS also announced revisions to past data, suggesting that job growth since March 2021 was stronger than originally reported. Between then and March 2022, growth was 568,000 more positions than the BLS first reported. The figures for November and December were also revised higher, for a total of 71,000 positions.

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After this week’s Fed meeting, where the federal funds rate was raised to a range between 4.50 percent and 4.75 percent, Chairman Jay Powell expressed an upbeat view of the economic outlook. This has fueled speculation that the central bank is closer to ending its interest rate hike campaign than previously signaled.

But he also warned that the “disinflation process” was still in an “early phase” and that price pressures were still too intense, especially those related to the “extremely tight” labor market.

Recent data shows an increase in job openings for December, bringing the total number of job vacancies to 11 million. Jobless claims also fell to a nine-month low last week.

However, wage growth weakened, and companies began to cut labor costs, cutting working hours and laying off temporary workers.

In December, the labor force participation rate, which tracks the number of Americans employed or looking for work, remained below pre-pandemic levels at 62.4 percent.

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