U.S. job growth blew past expectations in the first month of the year as the labor market continued to breeze through inflation-fighting monetary tightening by the Federal Reserve.
The Labor Department released its monthly jobs report for January at 8:30 a.m. ET on Friday. Here are the numbers, compared to Wall Street estimates:
Non-farm payrolls: +517,000 vs. +188,000 expected
Unemployment rate: 3.4% vs. 3.6% expected
Average hourly earnings, month-over-month: +0.3% vs +0.3% expected
Average hourly earnings, year-over-year: +4.4% vs. +4.3% expected
Friday's shock numbers mark a sharp jump from the prior month, which saw payrolls rise by an upwardly revised 260,000. The unemployment rate slipped to 3.4% in January, the lowest since 1969.
The blowout figures come just as the employment picture began to show some signs of moderation, with monthly data on a downtrend in recent months before January's outlier report.
The Federal Reserve has raised interest rates by 450 basis points, or 4.5%, since March 2022 in an effort to slow the economy and rein in inflation. Friday's data shows that even with these moves, the U.S. labor market remains strong.
U.S. stock futures fell following the release as the latest data defied investor optimism the Federal Reserve may pause its interest rate-hiking campaign in coming months. Stocks pared some losses early into the session on Friday but remained in red figures.
On Wednesday after the U.S. central bank delivered its latest interest rate hike, Fed Chair Jerome Powell said the labor market continues to be out of balance, and that reducing inflation is likely to require a period of below-trend growth and some softening of labor market conditions.
"This is a labor market on heat. Nobody would have expected a number as monstrous as this!" Principal Asset Management chief global strategist Seema Shah said in a note. "Is Fed Chair Jerome Powell now wondering why he didn’t push back on the loosening in financial conditions?"
"It’s difficult to see how wage pressures can possibly soften sufficiently when jobs growth is as strong as this and it’s even more difficult to see the Fed stop raising rates and entertain ideas of rate cuts when there is such explosive economic news coming in," Shah added.
Average hourly earnings rose by 0.3%, on par with the monthly increase in December. On an annual basis, wages rose 4.4% in January, a slightly slower pace from 4.6% in December. The labor force participation rate ticked up to 62.4%.
Gains were widespread across industries, with the largest increases seen across leisure and hospitality, professional and business services, and health care.
Leisure and hospitality, one of the industries hardest hit by the pandemic, continued its strong recovery, with employers adding 128,000 jobs in January. Employment in the sector remains 495,000 jobs, or 2.9% short of its pre-pandemic February 2020 level but is steadily narrowing.
Employment in professional and business services rose by 82,000 jobs, while health care added 58,000 jobs in January.
Editor's note: An earlier version of this story misstated average hourly earnings growth in December as having risen 4.3% over the prior year. Wages rose 4.6% over last year in December.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc