All eyes are on the Bureau of Labor Statistics as it prepares to release its closely watched January jobs report at 8:30 a.m. ET on Friday.
Economists anticipate the report will reveal a cooling trend in hiring, balanced by a steady unemployment rate, offering a snapshot of the US economy as it embarks on 2025.
Economists forecast slower hiring pace
Consensus estimates compiled by Bloomberg suggest that non-farm payrolls likely increased by 170,000 in January, a step down from December’s robust figures.
The unemployment rate is expected to hold steady at 4.1%.
December’s report showed a surprising surge, with the US economy adding 256,000 jobs, significantly exceeding economists’ forecasts.
The unemployment rate also dipped to 4.1%, down from 4.2% the previous month.
Comforting signal amidst economic uncertainty?
“Amidst all the tariff jitters, the January jobs report will likely send a comforting signal about the health of the economy at the start of the year,” wrote EY senior economist Lydia Boussour in a pre-release analysis.
We expect nonfarm payrolls to increase a solid 190,000 — above consensus expectations for a 170,000 gain but a step down from the robust pace of job creation reported in December.
Interest rate outlook hinges on labor market data
Ahead of the release, investors remain cautious about the Federal Reserve’s future monetary policy.
According to the CME FedWatch Tool, market participants currently assign no more than a 50% probability to a Federal Reserve interest rate cut occurring before its June meeting.
Key data points to watch:
Here are the key economic indicators Wall Street will be scrutinizing in Friday’s report, according to data compiled by Bloomberg:
- Nonfarm payrolls: +170,000 (expected) vs. +256,000 (previous)
- Unemployment rate: 4.1% (expected) vs. 4.1% (previous)
- Average hourly earnings (month-over-month): +0.3% (expected) vs. +0.3% (previous)
- Average hourly earnings (year-over-year): +3.8% (expected) vs. +3.9% (previous)
- Average weekly hours worked: 34.3 (expected) vs. 34.3 (previous)
Labor market cools, but remains resilient
Recent economic data suggests that the labor market is experiencing a slowdown but is not deteriorating rapidly, as layoffs remain relatively low.
New data released by the Bureau of Labor Statistics on Tuesday revealed that there were 7.6 million job openings at the end of December, a decrease from 8.15 million in November.
This marked the most significant sequential decline in job openings since October 2023.
However, other metrics within the report remained stable.
The Job Openings and Labor Turnover Survey (JOLTS) indicated that the hiring rate was unchanged at 3.4%. Similarly, the quits rate, a gauge of worker confidence, remained steady at 2%.
ADP report signals continued payroll growth
Data released by ADP on Wednesday morning indicated that private payrolls increased by 183,000 in January, an uptick from the 176,000 additions recorded in December.
Many economists contend that recent labor market data is consistent with the “broadly stable” narrative articulated by Federal Reserve Chair Jerome Powell during his most recent press conference on January 29.
“It’s a low-hiring environment,” Powell noted.
So if you have a job, it’s all good. But if you have to find a job, the job-finding rate, the hiring rates have come down.
Jobs report unlikely to shift Fed’s monetary policy
Given Powell’s recent expressed confidence in the labor market’s overall health, Jefferies US economist Tom Simons suggested in a note to clients that Friday’s jobs report is unlikely to significantly alter the Fed’s monetary policy stance.
“The employment data is always a risk event for the markets, but the data does not seem likely to alter the Fed’s stance on monetary policy after Powell repeated that he and his colleagues were in ‘no hurry’ to move forward with additional rate cuts,” Simons wrote.
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