All eyes are on the upcoming January jobs report, expected to be released on Friday morning, as investors seek insights into the labor market’s resilience amid rising interest rates and ongoing inflation. The anticipated report from the Labor Department is projected to reveal an increase of around 180,000 jobs last month, with the unemployment rate ticking up to 3.8%, as per Refinitiv economists’ estimates.
This forecasted job gain would be a drop from the 216,000 reported in December and the average monthly gain of 225,000 seen over the past year. Analysts, like Mark Hamrick from Bankrate, anticipate a slowdown in hiring for January.
The Federal Reserve is closely monitoring this report, looking for signs of a potential softening in the labor market as they aim to manage inflation. Despite a recent slowdown in the consumer price index, it remains above the Fed’s 2% target. Slower job growth and moderated wage gains could be viewed favorably by the central bank, which recently signaled a pause in its tightening campaign and readiness to cut interest rates.
The report is also expected to reveal a 0.3% increase in average hourly earnings for the month, with a 3.8% climb from the same period last year – a crucial measure of inflation.
Lydia Boussour, EY senior economist, expresses doubt that the January report will significantly alter the Federal Reserve’s stance on monetary policy. She suggests that robust job growth and wage growth above 4% may prompt some hawkish communication.
However, there is caution about potential “noise” in the data due to the Labor Department’s annual benchmark revisions. Despite expectations of a slowdown in the labor market after last year’s rapid pace, economists note that it remains historically tight.
A separate report from Challenger, Gray & Christmas indicates an uptick in job cuts by U.S. employers at the beginning of 2024. While companies planned 82,307 job cuts in January – a notable 136% increase from the previous month – it’s still down about 20% from the same period one year ago. This marks the second-highest layoff total for the month of January since 2009.