January’s jobs report, which split time between two presidents and factored in multiple major weather events, was a messy affair that saw last month’s numbers disappoint, but December and November revised significantly upward.
The Labor Department reported Friday that nonfarm payrolls grew by just 143,000 in January—well down from December’s figures and shy of the modest 169,000 jobs that economists expected, though good enough for a 49th consecutive month of payroll gains. December’s jobs tally was revised up by 51,000, to 307,000, while November figures were moved up by 49,000, to 261,000.
Unemployment was a brighter spot, however, with a rate of 4.0% coming in a tenth of a point lower than December’s 4.1% (which itself was down from November’s 4.2%). Economists were expecting the unemployment rate to come in level, at 4.1%.
Experts’ initial reaction is that there was a little too much going on for the Federal Reserve to sink its teeth into:
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“Today’s U.S. employment report has something for everyone,” says Peter Graf, Chief Investment Officer, Nikko Asset Management Americas. “The Fed will see the monthly jump in wages as confirmation that it was correct to be coyly non-committal about its next moves at the January meeting. Early-cyclers will embrace the healthy trifecta of rising participation, falling unemployment and positive payroll revisions as a sign that the U.S. economy is truly starting to take off. Trump-uncertainty doomers will question whether the drop in hours worked and sluggish January payrolls are part of a nascent slowing trend that started with the weak services PMI and fall in JOLTS job listings.
“Unfortunately for everyone, the possible influence of weather on this mixed report likely means that few people will actually have much confidence in their arguments.”
Here’s a brief look at the January jobs report’s most pertinent details:
- January payrolls: +143,000 month-over-month (estimate: +169,000)
- January unemployment: 4.0% (estimate: 4.1%)
- January hourly earnings: +0.5% MoM (estimate: +0.3%)
- December payrolls (revised): +307,000 (+256,000 previously)
- November payrolls (revised): +261,000 (+212,000 previously)
Health care had another strong month, with its 44,000 jobs created in January coming from hospitals (+14,000), nursing and residential care facilities (+13,000), and home health care services (+11,000). Retail trade jobs were up by 34,000, social assistance was up by 22,000 jobs, and government employment gains were 32,000.
There were few significant decliners, though employment in mining, quarrying, and oil and gas extraction fell by 8,000 jobs.
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“The weakness in mining and energy was a bit of a surprise, especially with expected deregulation in extraction, but this also highlights the efficiency that businesses are achieving,” says Scott Helfstein, Head of Investment Strategy at Global X.
Average hourly earnings for employees on private nonfarm payrolls were better than expected, up 0.5% month-over-month, to $35.87, which exceeded estimates for 0.3%. The 12-month growth rate in earnings was 4.1%.
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“Continued solid wage growth has helped keep consumer confidence generally positive, though that upbeat outlook sagged in recent surveys. Most Americans continue to spend, even as prices for many goods and services remain much higher than just a couple of years ago,” says Joe Gaffoglio, CEO and President at Mutual Of America Capital Management. “However, there is cause for concern that price levels and higher interest rates may be starting to bite, particularly for lower- and middle-income households, as credit card and auto loan delinquencies have been increasing.”
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The CME FedWatch Tool, which uses Fed funds futures prices to track the probability of a change to the central bank’s benchmark rate, now shows a 91.5% chance that the central bank will sit on its hands during the next Federal Open Market Committee (FOMC) meeting, set for March 18-19.
“Despite last week’s pause, we continue to project an additional one to two rate cuts in the second half of the year to ensure the economy is stable,” says Steve Rick, Chief Economist at TruStage.
More Expert Reactions to January’s Jobs Report
Here’s what other strategists, financial managers, and experts had to say about the January employment situation:
Jeff Schulze, Head of Market and Economic Strategy at ClearBridge Investments
“This release should keep the Fed in “wait and see mode” as the committee seeks more clarity on the Administration’s tariff policy while the economic backdrop remains solid with a solid labor backdrop and inflation proving stickier than anticipated. Importantly, today’s labor data reaffirms the resilient macro narrative that has emerged over the past several quarters following fears of a slowing labor market last summer.
“While a knee-jerk reaction could put modest upward pressure on long-term bond yields and, in turn, pressure equity market valuations, this release should support risk assets over the intermediate term as a solid labor market and economic backdrop help validate embedded earnings expectations.”
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Bill Zox, Portfolio Manager, Brandywine Global
“Risk assets like stocks and corporate bonds have been sending strong signals for 15 months that the labor market is on solid footing, and this data is very much in line with those signals. The next move from the Fed could be a hike rather than a cut.”
Jason Pride, Chief of Investment Strategy & Research at Glenmede
“Although it is a bit too early to see this play out in the data, efforts to streamline government operations through DOGE may loosen labor conditions to the extent that former federal employees become available for private sector jobs. However, net emigration could tighten the job market, as that population is disproportionately likely to engage in the labor force.”
Lindsay Rosner, Head of Multi Sector Fixed Income Investing, Goldman Sachs Asset Management
“Mixed items here. This month’s release was impacted by one-off factors including wildfires in California and a cold snap in other parts of the country. TLDR: we think the Fed is likely to be cautious about reading too much into today’s report.”
