In this morning’s data, the economy added 130,000 jobs in January, double what was expected, and the previous month’s increase was revised slightly lower. In reviewing the individual industries, the Health Care and Social Assistance industry and the Construction industry were relatively strong, while Government jobs and the Financial Activities industry were relatively weak. The Unemployment Rate came in at 4.3%, less than expected and one tenth less than the previous month. The Labor Force Participation Rate was 62.5%, one tenth higher than the previous month. Average Hourly Earnings increased 0.4% in January, a touch higher than expected, and grew 3.7% on an annual basis. In addition, Average Weekly Hours were 34.3, which is one tenth higher than the previous month.
Overall, a stronger jobs report than expected with a headline figure that was above expectations and a slight drop in the unemployment rate. Most of the strength was seen in the healthcare space, likely given the ongoing demand for these jobs considering the aging population, while job growth in government and financial activities was relatively weak. Wages grew in January slightly above expectations and the annual increase is above the 30-year average. Companies still appear hesitant to both let workers go and hesitant to hire as initial jobless claims remain in the low 200k range.
Productivity continues to play a role in the economy as artificial intelligence slowly becomes commonplace in appropriate businesses and the Federal Reserve is likely to remain on hold with their interest rate policy given this report. As tailwinds from the OBBBA legislation may take shape in the first part of 2026, its impacts will be a key driver of the economy, jobs, and markets in the weeks ahead.
In all, the yield on the 10-year US Treasury is higher following the report and equity futures are higher as we head into the market open.
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