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US DATA: US Payrolls Wrap: Strong Recent Trends Trim Cut Expectations [1/2]

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  • The January payrolls report saw a modest miss for nonfarm payrolls but it was more than offset by a robust two-month net revision along with a smaller than expected benchmark revision.
  • Further, the unemployment rate again surprised lower at 4.0% for its lowest since May 2024 in a further step away from the 4.3% the median FOMC member forecast for 4Q25 in the December SEP.
  • Wage growth meanwhile also surprisingly accelerated but against a notable caveat of average weekly hours sliding to lows last seen in the depths of the pandemic and mid-2010 (that’s despite the BLS saying adverse weather played no impact).
  • The combination saw Fed rate cut expectations trimmed again to 37bp of cuts for 2025 vs 43bp pre-data, although it was clearly less overtly hawkish than the December payrolls report which briefly saw 25bp of cuts priced for the year in subsequent Asia trade. 
image
  • See a more detailed take in part two. 
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  • The January payrolls report saw a modest miss for nonfarm payrolls but it was more than offset by a robust two-month net revision along with a smaller than expected benchmark revision.
  • Further, the unemployment rate again surprised lower at 4.0% for its lowest since May 2024 in a further step away from the 4.3% the median FOMC member forecast for 4Q25 in the December SEP.
  • Wage growth meanwhile also surprisingly accelerated but against a notable caveat of average weekly hours sliding to lows last seen in the depths of the pandemic and mid-2010 (that’s despite the BLS saying adverse weather played no impact).
  • The combination saw Fed rate cut expectations trimmed again to 37bp of cuts for 2025 vs 43bp pre-data, although it was clearly less overtly hawkish than the December payrolls report which briefly saw 25bp of cuts priced for the year in subsequent Asia trade. 
image
  • See a more detailed take in part two.