Why is Wall Street questioning the U.S. jobs report in January? What we know about Fed rate cut expectations shifts
stronger than expected January jobs report That boosted sentiment, but some economists said the data may not be as reliable as the headline suggested. Data released by the Bureau of Statistics U.S. Bureau of Labor Statistics It showed the unemployment rate edged down to 4.3% from 4.4%, with 130,000 new jobs created in January, about twice what economists predicted.
S&P 500 futures rose 0.32% following the news, with the index closing unchanged at 6,941 points the previous day.
Why are analysts skeptical?
Analysts cast doubt on the report, largely because of the sharp downward revision to previous data and the fact that most of January’s hiring came from health care, raising doubts about whether the gains reflected broad strength.
The surprising strength prompted some economists to question whether the headline employment data would subsequently be revised lower. The Bureau of Labor Statistics also lowered its previous employment forecast for 2024-25 to 181,000 from 584,000.
“I would not be happy with today’s jobs data. The job market remains fragile, and very fragile,” Moody’s Chief Economist Mark Zandi wrote on X. Overall job growth over the past year would have been much weaker, he added.
Economists at Pantheon Macroeconomics described January’s data as “incredible,” noting that simulated job creation surged during periods when health care businesses opened or closed. They believe statistical assumptions may have exaggerated hiring momentum, Fortune reported.
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What does this mean for the Fed to cut interest rates?
Despite misgivings, traders appear to be taking the data at face value. According to data from CME FedWatch, the market currently believes that there is a 92% chance that the Federal Reserve will stabilize interest rates at 3.5% in March, and interest rate cuts are expected to continue into this year.
“The broad-based strength in the January jobs report supports our view that the Fed will not cut spending [current Fed Chair Jerome] PowellBank of America analysts said in a report, Fortune reported.
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Others even believe that if the labor market continues to be tight, the possibility of raising interest rates may arise again. Still, some economists warn it may be too early to declare a turning point.
