U.S. job growth slowed more than expected in January, with nonfarm payrolls rising by 143,000, down from December’s upwardly revised 307,000. The unemployment rate held at 4.0%, giving the Federal Reserve reason to hold off on interest rate cuts until at least June.
Despite the slowdown, wage growth remained strong, with average hourly earnings rising 0.5% in January and 4.1% year-over-year. This should help sustain consumer spending and economic expansion. “An unemployment rate at 4% is considered very low, giving the Fed reason to keep rates unchanged,” said Jeffrey Roach, chief economist at LPL Financial.
Job gains were concentrated in healthcare (+44,000), retail (+34,000), and government (+32,000). However, employment remained largely unchanged in construction, manufacturing, financial activities, and leisure and hospitality.
Weather conditions had little impact on payrolls, though 573,000 people missed work, the highest for any January since 2011. The Labor Department’s annual benchmark revisions showed 598,000 fewer jobs were created in the 12 months through March 2023 than previously estimated.
Treasury yields rose, stocks were flat, and the dollar strengthened following the report.
The Fed kept its interest rate steady at 4.25%-4.50% in January after cutting rates by 100 basis points since September. Markets anticipate a rate cut in June, but concerns are growing over the impact of mass deportations, tariffs, and federal job cuts under the new administration.
Layoffs in government-funded sectors are already rising, raising fears that employment growth may weaken further in the coming months.
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