The American labor market underwent a spike in hiring to start the year, producing another wave of robust job growth despite the continued rise in interest rates, the Labor Department said Friday.

Nonfarm payrolls added 517,000 jobs in January, far exceeding economist's expectations of 187,000, while the unemployment rate fell to 3.4%, exceeding forecasts predicting a 3.6% reading and posting its lowest value since 1969.

"This is a labor market on heat; nobody would have expected a number as monstrous as this," Seema Shah, chief global strategist of Principal Asset Management, told CNN.

Growth across a multitude of sectors helped propel the massive beat against the estimate.

Leisure and hospitality jumped atop the list, adding 128,000 jobs in January. Other significant gainers were professional and business services (82,000), government (74,000), and health care (58,000). Retail was up 30,000 and construction added 25,000.

Even as businesses across the country hired with unexpected fervor, wage growth slowed slightly to 0.3 percent compared with December, and 4.4% from a year ago, an indication that some of the pressure to lure employees with pay raises may be easing.

The surge in job creation comes despite the Federal Reserve's efforts to slow the economy and bring down inflation from its highest level since the early 1980s.

The Fed has raised its benchmark interest rate eight times since March 2022, a risk policymakers hope will force businesses to pull back on their spending, including hiring.

In addition to the report on Friday, the government released data this week showing that the number of posted jobs per available unemployed worker rose again in December. As of December, there were about 11 million job openings, or just shy of two for every available worker.

Despite the growing trend of layoffs in the technology sector, the overall number of pink slips has remained extremely low.

Fed Chairman Jerome Powell, in his post-meeting news conference, noted the labor market "remains extremely tight" and is still "out of balance."

Stock market futures sank after the surprising jobs report showed. Dow futures were down about 160 points, or 0.5%. S&P 500 and Nasdaq futures were down 1% and 1.6% respectively.

Lately, good jobs news is bad market news, because investors fear it will spur the Federal Reserve to continue hiking interest rates for a longer period than expected.

"These strong job numbers, while very good for the economy, adds to this concern that inflation and higher prices are going to continue to be an issue," Eric Beiley, executive managing director of Steward Partners Global Advisory, told the New York Times.

Though Fed officials have expressed their intention to keep rates elevated for as long as it takes to bring down inflation, markets are betting the central bank starts cutting before the end of 2023.

Jobs Unemployment U.S. Dow jones