Massive Jump in January NFP Employment Supports FED Rate Cut Delay
The Non-Farm Payrolls (NPF) report for January was expected to show a slowdown in the numbers of new jobs and the average hourly earnings, while the unemployment rate was expected to tick up. But, employment in January was very strong, beating expectations across all components, which might be the reason why the FED decided to hint at May for the first rate cut, instead of March.
Earlier today, market expectations were for 142 basis points of rate reduction for 2024, while odds for a move in March stood at 34%. Now market are expecting 127 basis points for this year and the odds of a March cut are down to 21%. So, this is a great report and is certainly hawkish for the USD which has surged around 100 pips across the board. EUR/USD dipped back below 1.08, while Gold tumbled $30 lower from $2.057 to $20,27.
January 2023 US Employment Report from Non-Farm Payrolls
- January non-farm payrolls +353K vs +180K expected
- December NFP was +216K, revised higher to +333K
- November NFP was also revised higher to +173K from +164K
- Two-month net revision +126K vs -71K prior
- Unemployment rate 3.7% vs 3.8% expected
- Prior unemployment rate 3.7%
- Participation rate 62.5% vs 62.5% prior
- U6 underemployment rate 7.2% vs 7.1% prior
- Average hourly earnings MoM +0.6% vs +0.3% expected
- Average hourly earnings YoY +4.5% vs +4.1% expected
- Average weekly hours 34.1 vs 34.3 expected
- Change in private payrolls +317K vs +164K expected
- Change in manufacturing payrolls +23K vs +5K expected
- Household survey -31K vs -683K prior
- Birth-death adjustment -121K vs -52K prior
The numbers are amazing all over but we should take this report with a pinch of salt, since it’s the beginning of the year, so there are significant seasonal changes that might skew the numbers somewhat. The household survey revealed some weaker figures earlier with employment falling and more people seeking work.
This is a solid report on all fronts, with a strong increase of 0.6% in wage growth. Again, this might be due to seasonal fluctuations, as earnings often reset higher at the beginning of each year. But I think one of the main reasons for the jump in earnings is that companies are adjusting remunerations after 2-3 years of surging prices. The 2-year period of massive inflation and not much wage growth is coming to an end, so businesses have received the clear signal to start compensating workers accordingly.
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