U.S. businesses kept up a solid pace of hiring in January, a good sign as the economy heads into uncharted territory following the passage of sweeping tax legislation.
Employers added 234,000 jobs, slightly below December’s 242,000, capping off a four-month streak of monthly jobs growth eclipsing 200,000, payroll processor ADP reported on Wednesday.
{mosads}Mark Zandi, chief economist of Moody’s Analytics who compiles the ADP data, said the January figure continues a “string of very strong job numbers” and the latest number is consistent with a “rip-roaring job market.”
Growth is widespread across the country and hiring is robust throughout most sectors.
The service sector — restaurants, hotels, retail and schools — boosted the January figure, posting their best gains in more than a year.
Midsize and large companies continued their healthy hiring, while growth slowed slightly at smaller firms.
“At this point in the cycle it’s very impressive to be generating this many jobs,” Zandi said about the economic expansion, which is heading into its ninth year and is the second longest on record.
Strong Christmas sales and steady global growth also contributed to the labor market’s strength, Zandi said.
The job market remains on track to create 2 million jobs this year, he said.
Manufacturing added 12,000 jobs, construction 9,000 and mining added 1,000 jobs.
On Friday, the Labor Department will release its January jobs figures with expectations around 185,000.
The unemployment rate stands at 4.1 percent, the lowest level in 17 years, with expectations for that it will drop into the mid-3 percent range by early 2019.
“By mid-year growth will be very strong,” Zandi said.
“We’re going into rarefied territory here,” he said.
The labor market will face challenges this year though, including a shortage of qualified workers to fill open positions.
Alongside strong jobs growth wages are finally accelerating at a faster clip.
“We should see solid income gains and that will help support strong spending and keep the economy moving forward,” Zandi said.
Still, a close eye needs to be kept on wage and price pressures.
“Inflation does feel like it’s trying to pick up here … feels like things are getting a little heated here,” Zandi said.
“That means interest rates are going to rise,” he said.
The Federal Reserve will announced later on Wednesday whether it will raise a key interest rate.