The January jobs report is set for release Friday morning and is expected to show some signs of cooling in the labor market, which proved more resilient than many expected throughout 2023.
The monthly report from the Bureau of Labor Statistics, slated for release at 8:30 a.m. ET, is expected to show nonfarm payrolls rose by 185,000 in January while the unemployment rate ticked up to 3.8% from the previous month, according to consensus estimates compiled by Bloomberg. In December, the US economy added 216,000 jobs while the unemployment unexpectedly remained flat at 3.7%.
Here are the key numbers Wall Street will be looking at, according to data from Bloomberg:
Nonfarm payrolls: +185,000 vs. +216,000 previously
Unemployment rate: 3.8% vs. 3.7% previously
Average hourly earnings, month-on-month: +0.3% vs. +0.4% previously
Average hourly earnings, year-on-year: +4.1% vs. +4.1% previously
Average weekly hours worked: 34.3 vs. 34.3 previously
The report will serve as an early test for whether the labor market can remain resilient amid the Fed’s push to keep interest rates at two-decade highs. Continued signs of strength in the labor market are considered essential by many economists in order for the Federal Reserve to achieve a so-called soft landing, where inflation retreats to the Fed’s 2% goal without a recession.
“It will be difficult to draw firm conclusions from the January jobs data, which will be buffeted by revisions, possible weather impacts, and seasonal adjustment issues. However, after sorting through all the noise, we doubt the data will change our view that labor market conditions have loosened but that the job market remains healthy,” Oxford Economics lead US economist Nancy Vanden Houten wrote in note on Wednesday.
On Wednesday Federal Reserve Chair Jerome Powell described the labor market as “at or nearing normal but not totally back to normal.”
“It’s still a good labor market for wages and for finding a job,” Powell added. “But it’s getting back into balance. And that’s what we want to see.”
Recent data has reflected Powell’s observation of a normalizing labor market. ADP’s monthly private payroll data released Wednesday showed the difference between annual wage growth for workers changing jobs and workers staying in jobs has narrowed to pre-pandemic levels.
“You’re seeing solid pay growth, not supercharged pay growth like we saw before,” ADP chief economist Nela Richardson said in a call with reporters after the release on Wednesday.
The labor market has come into focus over the first month of the year as headlines of layoffs from many corporates have piled in. Broadly, economists haven’t seen this trend appear in the data yet, though, and don’t expect it to play a prominent role in Friday’s report.
Notably, Chair Powell reiterated that the Fed doesn’t believe it still needs to see significant softening in the labor market in order to start cutting rates.
“At this point we want to see strong growth,” Powell said. “We want to see a strong labor market. We’re not looking for a weaker labor market. We’re looking for inflation to continue to come down, as it has been coming down for the last six months.”
Still, economists will be watching for any signs of slowing. EY chief economist Gregory Daco wrote on X he believes the labor market is softening but it won’t appear in Friday’s headline payroll additions number. Instead, Daco will be watching for a lack of breadth in job gains.
“As in prior months, softening is visible in the reduced diffusion of job growth across sectors, the reduced hours worked & easing aggregate payrolls index,” Daco wrote.
This trend was recently flagged by JPMorgan chief US economist Michael Feroli in the Yahoo Finance Chartbook as a reason job growth could slow in 2024.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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