Far beyond expectations! US non-farm payrolls added 130,000 in January, unemployment rate unexpectedly dropped, market expectations for interest rate cuts cooled.

The seasonally adjusted nonfarm payrolls in the United States increased by 130,000 in January, the largest gain since April 2025, surpassing expectations of 70,000. The previous value was revised from 50,000 to 48,000. The nonfarm payroll figure for November was revised from 56,000 to 41,000, and for December from 50,000 to 48,000. After revisions, the total number of new jobs in November and December was 17,000 lower than previously reported. Consistent with past trends in the U.S. labor market, the healthcare industry led job growth in December with 82,000 new positions. The social assistance industry also saw an increase with 42,000 new jobs, with these two categories accounting for nearly all the net new job growth. After a year of sluggish growth, the construction industry added 33,000 new jobs this year. Prior economic data showed slow growth in the private sector, an increase in layoff plans, and a decrease in job openings, leading to low expectations for this report on Wall Street. Even White House officials, such as Kevin Hassett, Director of the National Economic Council, have been lowering market expectations. Fitch Ratings pointed out: "Given the slowing labor supply, this is a fairly healthy number. In fact, this is the fastest three-month average increase since February 2025. This contrasts sharply with recent alarming news about layoffs and a decrease in job openings. The labor market downside risks that the Fed was worried about at the end of last year have not disappeared, but these risks are clearly diminishing." The U.S. unemployment rate in January was recorded at 4.3%, slightly lower than the market expectation of 4.4%, the lowest since August 2025. A more comprehensive unemployment rate indicator, covering discouraged job seekers and individuals working part-time for economic reasons, decreased to 8%, a 0.4 percentage point decrease from December. Labor force participation increased from 62.4% to 62.5%, slightly better than the expected unchanged data. Unemployment rates in January decreased to 13.6% for teenagers. Unemployment rates for adult men (3.8%), adult women (4.0%), as well as for white (3.7%), black (7.2%), Asian (4.1%), and Hispanic (4.7%) workers have all slightly improved in recent months. In addition to monthly data, the U.S. Bureau of Labor Statistics also released the final benchmark revisions for March 2025. After seasonal adjustment, these revisions lowered initial statistics by 898,000. This number is slightly lower than the preliminary estimate of 911,000 in September of the previous year, but it is generally in line with Wall Street's expectations. Kay Haigh, an analyst at Goldman Sachs Asset Management, stated that there are initial signs of a tightening labor market, but there is still a long way to go for full tightening. Given the economy's continued performance beyond expectations, the focus of the FOMC will shift towards inflation. We still believe that the Fed has room for two rate cuts this year; however, if Friday's CPI unexpectedly rises, it may incline the Fed towards a hawkish stance. The average hourly wage rate in the U.S. in January was 3.7%, exceeding the expected 3.6% and lower than the previous value of 3.8%. Following the release of the January nonfarm employment report, U.S. short-term interest rate futures fell. Currently, traders estimate a 20% chance of the Fed cutting rates before April, significantly lower than the approximately 40% before the data was released. While they still bet on the Fed cutting rates in June, the probability of them staying put has increased to nearly 40%, up from around 25% before the employment report was published. This led to an increase in U.S. Treasury yields across all maturities, with the most sensitive 2-year U.S. Treasury yield soaring by nearly 8 basis points to 3.53%. U.S. stock index futures continued to rise to intraday highs, while the U.S. dollar's performance was unstable. John Briggs, head of U.S. interest rate strategy at Natixis, said: "The market was expecting weaker data, but the results were just the opposite. As for market expectations of rate cuts, considering the Fed's focus on the labor market, the decline is not surprising."