Nonfarm payrolls rose by 143,000 in January: "Fed’s tightrope walk just became even more precarious"

The Fed’s tightrope walk just became even more precarious, with the US labour market easing its pace and offering the first real indication of a cooling economy after months of relentless job growth. Despite the rise in January NFP levels falling short of expectations, revisions to the previous two months told a different story, with a combined upward adjustment of 100K jobs, highlighting that hiring momentum in late 2024 was stronger than initially thought. Consequently, the headline figures suggest that the labour market remains solid but no longer running hot and comes at a crucial time for policymakers trying to gauge whether to maintain a tight monetary policy. Additionally, a sectoral shift in employment data brings an interesting new dimension, as services become a key growth driver as capital-intensive industries begin to falter. From mining to malls, we are witnessing a tale of two economies where services thrive while resource-based industries fall by the wayside.

This report signals gradual cooling not a major slowdown. This may delay Fed rate cuts, giving further support to the US Dollar on top of the widening interest rate differential between the G3. In the last two weeks, we have seen both the Bank of England and ECB cut interest rates, but the Fed held rates steady. The markets will be on the lookout for the next CPI inflation and wage growth data on 12 February for further clues about future Fed interest rate policy. The US economy added just 143K jobs in January compared to the 170k expected by most analysts, but the unemployment rate dipped to 4%. Upward revisions for November (+49K) and December (+51K) suggest stronger momentum. Health care, retail and social assistance led job gains, while mining and oil and gas declined.