Mixed signals from the U.S. January non-farm payrolls, will the Federal Reserve continue to observe?

According to a report released by the U.S. Bureau of Labor Statistics on Friday, non-farm payrolls increased by 143,000 in January, revised up to an increase of 307,000 in December. The Bureau stated that the wildfires in Los Angeles and severe winter weather in other parts of the U.S. had "no significant impact" on employment this month. Employment growth in the U.S. slowed in January, following annual revisions by the government that indicated the labor market's vitality last year was weaker than previously expected.

The 143,000 new jobs in January fell short of economists' expectations of 170,000 and were also below December's 307,000. The monthly employment growth for December was revised up from the previous 256,000. Meanwhile, the monthly employment growth data for November was also revised upward. In November and December, the U.S. labor market added 100,000 more jobs than initially estimated.

As an important indicator of inflationary pressure, wages in January increased by 4.1% compared to the same period last year, higher than December's 3.9% and above economists' expectations of 3.8%. On a monthly basis, wages grew by 0.5%, up from last month's 0.3% increase.

At the same time, the labor force participation rate rose from 62.5% to 62.6%.

The government’s annual benchmark revisions show that last year, job growth averaged 166,000 per month, a slowdown from the initially reported 186,000. The Bureau of Labor Statistics uses records from the unemployment insurance tax system and adjusts for businesses opening and closing to revise its previously published employment statistics.

The unemployment rate stands at 4.0%, and the survey used to generate this figure included separate revisions to reflect new population estimates at the beginning of the year, making it not comparable to previous months.

The changes in January's employment data and the latest employment figures at the beginning of 2023 indicate that the labor market is slowing but remains healthy, continuing to drive economic growth without causing inflationary pressure. This also helps explain why Federal Reserve policymakers have indicated they are not in a hurry to further lower borrowing costs after three rate cuts last year.

Steve Sosnick, chief strategist at Interactive Brokers, stated that the report shows "people have jobs. Most people who want to work have jobs, and those who are employed are earning higher wages," adding that "this does not incentivize the Fed to take any action now."

Officials are also dealing with gradually easing inflation and uncertainty surrounding President Donald Trump's new policies. Although Federal Reserve Chairman Jerome Powell recently described the job market as "fairly stable," he and his colleagues have repeatedly stated that they do not want to see the job market cool further.

Following the report's release, stock index futures and U.S. Treasury yields rose, while the dollar fluctuated.

January's job growth was primarily driven by healthcare, retail trade, and government sectors. Employment in mining, quarrying, oil and gas extraction, temporary help services, and the automotive manufacturing sector saw declines Although the Bureau of Labor Statistics stated that the weather had little impact on January's data, nearly 600,000 people were unable to work last month due to severe weather, the highest number in four years. Additionally, 1.2 million people who typically work full-time could only find part-time work due to weather reasons.

This also affected hours worked, which fell to the lowest level since the outbreak of the pandemic. Meanwhile, hourly wages increased by 0.5%