NFP Data Rises More Than Expected! What Indications Can Market Players Take?


U.S. job growth picked up in January, likely due to a resilient economy and high worker productivity prompting businesses to hire and retain more workers. This trend is seen to protect the economy from this year's recession.

Nonfarm payrolls increased by 353,000 workers last month, the U.S. Labor Department's Bureau of Labor Statistics said on Friday. Data for December was revised upwards to show a gain of 333,000 workers compared to 216,000 as previously reported. Economists interviewed by Reuters had forecast a job addition of 180,000.

Estimates range from 120,000 to 290,000. Job gains remain well above the roughly 100,000 jobs a month needed to sustain growth in the working-age population. However, labor market momentum has slowed from a strong pace in 2022 due to a large interest rate hike by the Federal Reserve.

However, job gains are more than sufficient to support the economy through strong consumer spending.

Minimum hourly earnings increased by 0.6% last month after rising 0.4% in December. In the 12 months to January, wages rose by 4.5% after rising 4.3% in the previous month.

Annual wage growth was well above the pre-pandemic average and in the 3.0% to 3.5% range that most policymakers consider consistent with the US central bank's 2% inflation target, supporting the view that March may be too early for the Fed to start cutting rates.

The unemployment rate was at 3.7% in January. January's unemployment rate cannot be directly compared to the 3.7% rate in December. New population estimates are fed into household surveys, from which the unemployment rate is derived.

The Fed decided to keep interest rates unchanged on Thursday, but at the same time Chairman Jerome Powell gave broad support for the strength of the economy, telling reporters that interest rates have peaked and will come down in the coming months.

Most economists have shrugged off significant layoffs—recently including the 12,000 job cuts announced by United Parcel Service this week—arguing that the focus should be on worker productivity, which has exceeded an annual growth rate of more than 3% for three straight quarters. as well as reduced labor costs.

Employers are generally wary of downsizing after facing difficulties finding workers during and after the Covid-19 pandemic.

Financial markets have scaled back their expectations for a rate cut in March and now expect the central bank to start lowering borrowing costs in May, according to CME Group's FedWatch Tool. Since March 2022, the Fed has increased its policy rate by 525 basis points to the current range of 5.25% to 5.50%.