Experts: Red-Hot January Jobs Report Likely to Stay the Fed’s Hand

The first jobs report of 2024 was a whopper, with January’s nonfarm payrolls data soaring above estimates in just about every important metric. It represents a red-hot start to the new year—one that hints Federal Reserve Chair Jerome Powell’s hesitancy to cut its benchmark interest rate might be warranted.

The Labor Department reported Friday that nonfarm payrolls grew by 333,000 in January, topping expectations of 185,000 by a wide chasm. The figure marked the 37th consecutive month of jobs growth. Here’s a quick look at the most pertinent details, most of which exceeded expectations and illustrated a still-resilient economy.

• January payrolls: +353,000 (vs. +185,000 est.)
• January unemployment: 3.7% (vs. 3.8% est.)
• January hourly earnings: +0.6% (vs. +0.3% est.)
• December payrolls (revised): +333,000 (vs. +216,000 previously)
• November payrolls (revised): +182,000 (vs. +173,000 previously)

Digging deeper into the January jobs report, notable gains were made in professional and business services (+74,000), health care (+70,000), retail trade (+45,000), and government (+36,000). There were few areas of weakness; mining, quarrying, and oil and gas extraction was one of the worst industries at a mere 5,000-job decline in January. Earlier this week, the Fed’s chief said, “I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting [to cut interest rates].” Friday’s jobs report is unlikely to move him. The 24 Best ETFs to Buy for a Prosperous 2024 “Today’s report reinforces the narrative this week that the Fed does not need to rush into rate cuts,” says Jason Pride, Chief of Investment Strategy & Research at Glenmede. “With an economy printing jobs numbers like this and wages staying hot, that doesn’t sound like the consistent inflation progress that the Fed would like to see before starting to cut rates. “A March rate cut now appears increasingly unlikely, as do calls for five to six rate cuts this year. The more likely trajectory is two to three cuts this year, beginning around summer.”

Expert Reactions to January’s Jobs Report

Here’s what strategists, financial managers, and other experts had to say about the January employment situation: Steve Wyett, Chief Investment Strategist, BOK Financial “It isn’t as though inflation is getting ready to reaccelerate to the upside, but numbers like this are why The Fed has been providing a message of patience as they think about reducing rates. The capital markets are reacting with higher rates as rate cut expectations are pushed out stocks are mixed as this news is offset by some very strong earnings reports from Meta Platforms and Amazon (AMZN). The economy remains incredibly resilient and first-quarter GDP estimates are being revised higher. “From an overall economic standpoint however, this adds to the outlook for continued positive economic growth, keeps a soft landing as the base case, and while it might slow the progression of inflation towards 2%, it doesn’t stop it. Fed rate cut expectations are moving further out the curve and overall interest rates are higher this morning.” Joe Gaffoglio, President, Mutual of America Capital Management “Fed Chair Jerome Powell recently signaled that interest-rate cuts may not start as soon as the market wanted, and this jobs report hasn’t given him any reason to change that stance. “While many middle-class consumers have benefited from strong wage growth over the past couple of years, they continue to deal with high prices for many goods and services. Spending may also be impacted by higher interest rates, the resumption of student loan payments and the inevitable exhaustion of pandemic savings, all of which have contributed to increasing levels of consumer debt. Given the importance of consumer spending to the U.S. economy, we are watching unemployment claims, wage growth and other data that may further affect consumers’ financial health.” 13 Dividend Kings for Royally Resilient Income Michelle Cluver, Portfolio Strategist, Global X “Labor data remains a focus as markets assess when the Fed is likely to start reducing interest rates. The January FOMC press conference provided valuable insights into how the Fed is thinking about inflation and labor data as they navigate the shift into the rate-cutting phase of monetary policy. Ultimately, the Fed is not in a rush to cut rates, but they have been encouraged by the data from the last 6 months. While the recent level of data has been good, they want to see a continued trend of good data before they start reducing policy interest rates.” Lindsay Rosner, Head of Multi-Sector Fixed Income Investing, Goldman Sachs Asset Management “The market may have seen its shadow this morning with the jobs number and strong average hourly earnings (AHE). The Fed’s ‘highly unlikely’ for March seems applicable. Whether the Fed goes in March or May, the pivot has happened and monetary policy will be wind at the sails of fixed income investors in this strong economic environment.” David Russell, Global Head of Market Strategy, TradeStation “This jobs report, coupled with the strong Q4 GDP, confirms remarkable acceleration in the U.S. economy. There was a lot of noise in the data, with potential for revisions lower. It keeps a bottom on interest rates for now but also doesn’t mean inflation is headed back up considering the recent productivity numbers. Longer term, stocks could be in a strong spot with accelerating economic growth supporting consumption and earnings.” 5 Best Vanguard Retirement Funds [Start Saving in 2024]