The US economy created 143,000 jobs in January, falling short of forecasts, but a drop in the unemployment rate and robust gains in earnings underscored the strength of America’s labour market.
While January’s figure undershot expectations of 170,000 in a Reuters poll, the Bureau of Labor Statistics also revised up the bumper figure for December, from 256,000 to 307,000.
Economists and traders highlighted a decline in the unemployment rate to 4 per cent in January, down from 4.1 per cent the previous month, which they said bolstered the Federal Reserve’s case to proceed slowly with interest rate cuts.
US stocks and government bonds both came under pressure following Friday’s report.
The two-year Treasury yield, which tracks interest rate expectations and moves inversely to price, jumped 0.08 percentage points to a two-week high of 4.29 per cent, while the 10-year yield added 0.05 percentage points to 4.49 per cent.
The S&P 500 index of blue-chip US stocks closed almost 1 per cent lower and the tech-heavy Nasdaq Composite dropped 1.4 per cent.
Friday’s jobs data came just over a week after the Fed kept rates on hold at 4.25 to 4.5 per cent, despite pressure from US President Donald Trump to lower borrowing costs.
Diane Swonk, chief economist at KPMG US, said the fall in unemployment — and increased participation in the labour market — provided “more reason for the Fed to feel comfortable” in its decision to slow the pace of rate cuts this year.
Average hourly earnings also increased 4.1 per cent over the past 12 months, which economists took as a sign of the persistent health of the US labour market.
Markets expect the next Fed rate cut to arrive by July, with a 60 per cent chance of another by the end of the year, down from 70 per cent before the jobs report.
“When we step back and look at the trends, this is still pointing to a very healthy labour market,” said Sarah House, senior economist at Wells Fargo. “This keeps the Fed on their bias to hold for the foreseeable future.”
A breakdown of the labour market figures showed that the bulk of those who found work in the US last year were foreign born — about 1.9mn of the 2.7mn jobs gains.
“If we were seeing strong job growth, it’s because of growth in the immigration population — which I think is worth thinking about in terms of the intensity of the crackdown in unauthorised immigration,” said David Kelly, chief global strategist at JPMorgan Asset Management.
The release also showed revisions for earlier months in 2024 were better than feared.
“Many analysts, myself included, had expected that the revisions would leave the pace of job growth in the last nine months of 2024 on a weaker trajectory,” said Omair Sharif, president of research firm Inflation Insights, adding that January’s figures represented “a noticeably better outcome than was feared coming into today’s data”.
