Economists questioned January’s jobs data, citing unpredictable elements and excessive hiring momentum.
A stronger-than-expected January jobs report lifted market sentiment, but several economists said the data may not be as strong as the headline suggests. Figures released by the US Bureau of Labor Statistics showed the unemployment rate fell to 4.3% from 4.4%, adding 130,000 jobs in January – almost double economists’ forecasts.
Despite the skepticism, traders seem to be taking the data at face value. (Representative picture)After the release, futures linked to the S&P 500 rose 0.32% while the index closed flat at 6,941 in the previous session.
Why are analysts skeptical?Analysts are questioning the report primarily because of a sharp downward revision to earlier data and that most of January’s hiring came from health care, raising doubts about whether the gains reflect broad-based strength.
The surprising strength prompted some economists to question whether the headline payroll figure could be revised downward later. The BLS revised down its previous 2024-25 job estimate to 181,000 from 584,000.
“I wouldn’t hold my breath on today’s job numbers. The job market is fragile and extremely risky,” Moody’s chief economist Mark Zandi wrote in X. He added that without health care job gains, overall employment growth over the past year would have been much weaker.
Economists at Pantheon Macroeconomics described elements of January’s data as “unprecedented,” pointing to a sharp jump in job creation modeled between health care business openings and closings. According to Fortune, they argued that statistical estimates could overstate the hiring pace.
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What does this mean for the Fed rate cut?Despite the skepticism, traders seem to be taking the data at face value. According to CME FedWatch, markets now see a 92% chance that the Federal Reserve will keep rates steady at 3.5% in March, with expectations for a further push later in the year.
“Broad-based strength in the January jobs report vindicates our view that the Fed will not taper [current Fed Chair Jerome] Powell,” Bank of America analysts said in a note, Fortune reported.
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Others even see the possibility of rate hikes if the labor market continues to tighten. Still, some economists caution that declaring a turning point may be premature.
Prakriti Dev is a journalist at Hindustan Times Digital, where she is part of the US desk. He works on stories related to American politics, crime, sports, entertainment and weather. He particularly enjoys covering political developments that span the globe. Through his work, he aims to break down complex phenomena in a way that seems simple and understandable. Before joining Hindustan Times, he worked with The Indian Express Digital, where he covered global affairs. He holds a Master’s degree in Mass Communication with a specialization in Journalism along with a Bachelor’s degree in English Literature. Outside the newsroom, Prakriti enjoys getting out of her comfort zone and traveling. She finds her passion through all forms of storytelling, including conversation, painting, theatre, dance and photography. He appreciates discussions that challenge his perspective and help him see the world a little differently.Read more
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