SCOTT SIMON, HOST:
Employers added more than half a million jobs to the U.S. market last month. January's job gains were the strongest in six months, and the unemployment rate fell to a level that's not been seen since 1969, when The 5th Dimension topped the charts with this song.
(SOUNDBITE OF SONG, "AQUARIUS/LET THE SUNSHINE IN")
THE 5TH DIMENSION: (Singing) Let the sunshine, let the sunshine in...
SIMON: The sunny job report comes at an otherwise hairy time for the economy. Consumer spending's been falling in recent months, while interest rates are on the rise. NPR's chief economics correspondent Scott Horsley joins us.
Scott, thanks so much for being with us.
SCOTT HORSLEY, BYLINE: Good morning, Scott.
SIMON: The Federal Reserve's been trying to slow down the economy, raising interest rates to bring down inflation. The job market, though - what? - hasn't been paying attention.
HORSLEY: That's right. The job market is the Energizer Bunny in this economy. It just keeps going and going month after month. It looked as if it were slowing down a little bit in October and November and December. But then along comes January. It got a second wind and blew past expectations with 517,000 jobs, almost twice as many as the month before.
SIMON: And what might be behind that?
HORSLEY: There are some seasonal factors that may have inflated that number a little bit. But we also got an annual update from the Labor Department yesterday based on more complete information that shows job growth over the last two years was significantly stronger than initially reported. So even if you discount that big January number, the job market still has a lot of momentum. At the White House yesterday, President Biden noted that in the 24 months since he took office, the economy's added more than 12 million jobs.
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PRESIDENT JOE BIDEN: That's the strongest two years of job growth in history by a long shot. As my dad used to say, a job's about a lot more than the paycheck. It's about your dignity.
HORSLEY: All those extra paychecks could give a lift to the economy. But there is also a concern, Scott, that workers' rising wages could make it harder to bring down inflation.
SIMON: And tell us about rising wages.
HORSLEY: Wages in January were up about 4.5% from a year ago. Now, that's actually the smallest annual increase since the summer of 2021. So wage growth is cooling off a bit. But wages are still climbing faster than the Federal Reserve is comfortable with. Of course, workers like it when their wages go up. But the Fed is concerned that rising wages could fuel higher prices, and that would force the central bank to push interest rates even higher as it tries to curb inflation.
SIMON: Scott, how are the financial markets reacting?
HORSLEY: You know, it's interesting. Last year, a really strong jobs report like this probably would have caused the stock market to tank because investors would have worried about inflationary effects and how the Fed might respond with rising interest rates. But yesterday, markets pretty much shrugged off this report. Stocks were down a little bit for the day. But both the S&P 500 index and the Nasdaq ended up for the week. Economist Sarah House of Wells Fargo says maybe investors are just thinking a little bit differently right now.
SARAH HOUSE: Maybe markets are seeing good news as good news again for a change. And at the end of the day, I think the fact that we're still adding so many jobs, and that's good for consumer demand - maybe it's been viewed as, you know, good for just the economy's overall growth prospects.
HORSLEY: Fed Chairman Jerome Powell did warn this week that the battle over inflation is not yet won. He says there's still work to do to get prices under control. But here's some more good news. For the last few months, wages have been going up faster than prices, which means those paychecks the president talked about are stretching farther. And that's the opposite of what was happening for much of the last year.
SIMON: NPR's Scott Horsley.
Thanks so much.
HORSLEY: You're welcome.
(SOUNDBITE OF MEXICAN INSTITUTE OF SOUND'S "MY BUDDY @JULPS") Transcript provided by NPR, Copyright NPR.
