The U.S. Bureau of Labor Statistics reported today that total nonfarm employment rose by 143,000 in January, and the unemployment rate fell to 4.0 percent. Job gains occurred in health care, retail trade and social assistance. Employment in the mining, quarrying and oil and gas extraction industry fell.
This press release provides statistics from two monthly surveys. The Household Survey measures the state of the labor force, including unemployment, by demographic characteristics. The Enterprise Survey measures non-farm employment, hours worked, and earnings by industry. For more information on the statistical concepts and methodology used in these surveys, see the Technical Note.
The unemployment rate fell to 4.0 percent in January, after accounting for annual adjustments to population controls. The number of unemployed, at 6.8 million, changed slightly over the course of the month. See note at the end of this press release Among the main groups of workers, unemployment rates for adult men (3.7%), adult women (3.7%), adolescents (11.8%), whites (3.5%), blacks (6.2%), Asians (3.7%) and Hispanic (4.8%) showed little or no change in January.
The number of long-term unemployed (those unemployed for 27 weeks or more), at 1.4 million, changed slightly in January. The long-term unemployed constituted 21.1% of the total unemployed.
In January, both the labor force participation rate (62.6%) and the employment-to-population ratio (60.1%) remained unchanged, after accounting for annual adjustments to population controls. Both metrics have been relatively stable in recent months.
The 4.5 million people working part-time for economic reasons changed little in January. These individuals preferred to work full-time but were working part-time because their hours had been reduced or because they could not find full-time jobs.
Market Reactions to U.S. Nonfarm Employment Change
Traders and economists expect the Nonfarm Payrolls report to show that the U.S. created 164,000 new net jobs, with average hourly earnings up 0.3% month-on-month (4.0% y/y) and the U3 unemployment rate stabilizing at 4.2%.
Overview of natural family planning Last month’s jobs report exceeded expectations in terms of overall job growth and revision of previous estimates, but much of that strength can be attributed to recovery from previous weather-related disruptions. More importantly, the household survey was relatively weak, resulting in a low participation rate and a high unemployment rate (to 4.0%).
For this month, the outlook is tepid, with economists expecting “only” 164,000 net new jobs and the unemployment rate to remain steady at 4.2%. Among the key areas to watch is the average hourly wage gauge, which has risen slightly in recent months, raising concerns about accelerating wage growth and potentially limiting the Fed’s scope to cut interest rates further if it continues to do so.
As the bottom left box below indicates, traders are skeptical that the Fed will offer a lot in terms of additional interest rate cuts this year, with only one 25 basis point cut expected in the first half of the year and only a 50/50 chance of a second cut in the second half of 2025. With few jobs and inflation reports left ahead of the Fed’s “decisive moment,” this week’s jobs report may not be as impactful as the market as other more impactful releases immediately.
The employment component of the ISM manufacturing PMI fell to 45.3 from 48.1 last month.The Institute for Supply Management’s service sector employment index stood at 51.4 compared to 51.5 last month. The ADP employment report showed 122,000 net new jobs, down 146,000 jobs last month.
This month’s forecast for the change in US nonfarm payrolls
Looking ahead, analysts are cautiously optimistic about the trajectory of the labor market. While the December report provided encouraging signs, challenges remain. The constant threat of inflation, especially in sectors such as energy and food, can affect consumer purchasing power and, consequently, job growth. In addition, geopolitical uncertainty, including tensions in Eastern Europe and potential disruptions in global supply chains, could pose risks to the labor market.
The outlook for upcoming NGPY change reports is mixed. Some analysts expect job growth to begin to slow as the economy moves closer to full employment. Others argue that the labor market still has room for growth, especially in sectors that are lagging behind in recovery. The Fed’s actions in the coming months will play a crucial role in shaping the job landscape. As the central bank navigates the delicate balance between supporting economic growth and controlling inflation, its decisions will have far-reaching implications for the labor market.
When weighing our internal data and models, key indicators point to a reading roughly as expected in this month’s NFP report, with key job growth likely to come somewhere in the 150-200k range, albeit with a large range of uncertainty given the current global backdrop.
Regardless, the monthly fluctuations in this report are very difficult to predict, so we don’t count too much on any forecasts (including our own). As always, other aspects of the release, notably the closely watched average hourly earnings figure of 0.4% m-o-m in the latest NM report.
As we will explain below, the US dollar rose to test its highest levels in more than two years, but the recent pause near those high levels prevented the pair from heading to the nonfarm payrolls report in an overbought state.
