US employers added 143,000 jobs in January and the unemployment rate dipped slightly, according to the Labor Department — signs that the labor market is slowing but still looks to be on solid footing.

The headline number fell short of the 169,000 jobs economists had expected, according to a Wall Street Journal survey. The unemployment rate, however, ticked down to 4% — the lowest monthly rate since May — versus expectations it would remain flat with 4.1% a month earlier.

The slower pace is likely not drastic enough to push the Federal Reserve, led by Chairman Jerome Powell, to cut rates, with economists believing the Fed would first need to see consistent growth below 100,000 jobs and a rise in unemployment.

“We would need to see multiple weaker jobs reports in a row in order for the Fed to cut interest rates sooner,” Glen Smith, chief investment officer at GDS Wealth Management, said in a note.

The report marks the final month of the Biden administration, which was marked by four years of rampant inflation, even as the job market remained strong. Now, economists aim to gauge how Trump’s new policies — including a major clampdown on immigration and the imposing of trade tariffs — will affect the labor market.

The Dow ticked up after the jobs data came out but plunged 444 points, or 1%, after Trump said that he plans to announce reciprocal tariffs on many countries next week.

The tech-heavy Nasdaq and benchmark S&P 500 also dropped.

Friday’s jobs data report revised the payroll employment numbers for November and December up by 49,000 and 51,000, respectively, meaning the robust employment months were even stronger than initially reported – making January look like a sizable step down.

“Today’s jobs report fell short of expectations, indicating that December’s unexpected boost was an anomaly,” Sandra Moran, chief customer experience officer at WorkForce Software, wrote in a note. 

“Opportunities for unemployed workers are decreasing as businesses remain cautious about increasing their headcount,” she added.

The January report also included the annual revision to the payroll figures, showing that employers added about 600,000 fewer jobs than initially reported in 2023 and early 2024.

The downward revision was better than expectations that the payroll numbers would be corrected down 800,000 jobs.

Average hourly earnings jumped 0.5% in January, placing wages 4.1% higher than last year. 

The wage growth is due in part to 21 states hiking their minimum wages last month, boosting pay for about 9 million Americans, according to Mark Hamrick, senior economic analyst at Bankrate.

The Bureau of Labor Statistics said the California wildfires and snowstorms had “no discernible effect” on the January jobs report.

Economists had largely expected the natural disasters and storms to impact about 20,000 roles. 

However, the average work week dropped to 34.1 hours in January – the lowest level since March 2020, a likely impact from harsh weather conditions.

A large unknown moving forward is the economic impact of Trump’s immigration policies, including his promise to carry out mass deportations.

The president has started to deport migrants, though not yet at a huge scale. A negative shift in immigration could slow down employment growth, as well as push wages higher and unemployment lower.

Trump’s new 10% tariff on China – as well as his planned 25% taxes on Mexico and Canada, which have been temporarily halted – could also reheat inflation, according to economists.

After Friday’s job report, investors will shift their focus to next Wednesday’s Consumer Price Index, a key inflation report and an important factor in the Fed’s decision on whether to cut rates, Smith said.

“The stock market is closing in on record highs, even with worries about tariffs, artificial intelligence, big cap tech’s prospects and uncertainty about the Federal Reserve,” he said.

Share.
Exit mobile version