January Job Report Exceeds Expectations

By Mike Tubbs, Quantitative Portfolio Analyst, with Lauren Rosales-Shepard, Content Writer

While January was littered with headlines about technology sector layoffs, the data itself couldn’t be more convincing of the strength of the current labor market in the United States. Nonfarm payroll jumped to 517,000 jobs, utterly decimating the Dow Jones estimate of 187,000, and nearly doubling December's 260,000 gains to boot.

This increase pushed the unemployment rate down to 3.4%, which is the lowest recorded number since May 1969. Other labor market indicators–like participation–were also favorable.

The bulk of the labor force gains came in hospitality, adding 128,000 jobs to the economy, but business and professional services also added 82,000 jobs; these categories were followed by government (74,000), and healthcare (58,000).

Despite inflation beginning to show signs of slowing down, earnings growth for private nonfarm payroll employees remains robust at 4.4%. These numbers are in line with most of the postings post-pandemic.

These postings all align with the Fed’s soft landing of the macroeconomy. The pace of rate hikes is beginning to slow; the most recent hike was 25 bps. With a resilient labor market, the most likely scenario remains no recession, inflation coming down to its target, and slowing rate hikes. Measures of the risk premium are beginning to fall, which leads us to believe the economy is on a path to equilibrium.



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