How does Wall Street view January's non-farm employment? The market still has resilience, don't expect a rate cut in March, the Federal Reserve still has to keep an eye on Trump

The non-farm payroll report for January released on Friday showed that although the increase in employment for January was below expectations, the employment figures for the previous two months were significantly revised upward. The unemployment rate in January slightly declined, indicating a cooling labor market, but employment is still growing steadily. The main data are as follows:

• In January, the U.S. added 143,000 non-farm jobs, which was 32,000 less than market expectations. The employment figures for the previous two months were revised upward by a total of 100,000, with December's figure revised up by 51,000 to 307,000.
• The unemployment rate in January fell to 4.0%, while the market expected it to remain unchanged from December's 4.1%.
• The average hourly wage in January increased by 4.1% year-on-year, while the market expected growth to slow from December's 3.9% to 3.8%. Month-on-month, hourly wages grew by 0.5%, with the market expecting it to remain unchanged from December's growth rate of 0.3%.
• The labor force participation rate in January was 62.6%, compared to 62.5% in December.
• After annual revisions, the number of non-farm jobs added in the 12 months ending March 2024 was revised down by 589,000 from the initial report, lower than the preliminary estimate of 818,000 in August last year, which would have been the largest decline since 2009. After revisions, the average monthly increase in employment over the past year was 166,000, lower than the estimated 185,000 in August last year.

Wall Street believes that the January non-farm payroll report reflects a slowdown in employment growth at the start of the year, but it does not deviate from the Federal Reserve's assessment of the labor market, which remains resilient, giving the Fed reason to continue pausing interest rate cuts and keeping current rates unchanged. Moreover, considering the uncertainty of the impact of Trump's policies, the Fed is less likely to take action next month.

Capital Economics believes that the lower number of jobs added in January is not a cause for concern, as the employment figures for November and December were both revised upward. The strong upward revision of employment figures and the decline in the unemployment rate allow the Fed to remain on hold this year.

Morgan Stanley Wealth Management Chief Economic Strategist Ellen Zentner also believes that the upward revisions of employment figures for November and December, along with the decline in the unemployment rate in January, offset the impact of the lower-than-expected employment figures in January. Zentner stated:

"Those hoping for a weak (employment) report that would lead the Fed to restart interest rate cuts did not get their wish."

Principal Asset Management Chief Global Strategist Seema Shah believes that this non-farm payroll report likely rules out the possibility of a rate cut by the Fed in March. Aside from the slightly disappointing overall employment figures, the broader situation remains that the labor market is resilient and wage pressures continue, which gives the Fed no reason to cut rates immediately.

"More importantly, due to the potential significant impact of the Trump administration's policies on the state of the labor market and inflation outlook, the Fed currently has ample reason to keep rates unchanged."Stephen Stanley, Chief U.S. Economist at Santander US Capital Markets LLC, commented that the Federal Reserve believes the characteristics of the U.S. labor market are essentially stable and healthy, and this employment report certainly points in that direction, providing no reason for the Fed to consider further rate cuts in the short term.

Samuel Tombs, Chief U.S. Economist at Pantheon Macroeconomics, stated that although there have been revisions, the latest non-farm payroll report indicates that the job market is more stable than it was a few months ago. Overall, the number of jobs created in the U.S. economy last year was fewer than Pantheon previously expected, but this trend does not seem to be worsening. Pantheon no longer expects the Fed to cut rates in March.

Paresh Upadhyaya, Head of Fixed Income and Currency Strategy at Amundi US Inc., commented that this report "undoubtedly dispelled market expectations for a rate cut window in March," and the Fed is currently in a pause on rate cuts, "which could be indefinitely paused considering policy uncertainty."

Lindsay Rosner, Head of Multi-Sector Fixed Income Investment at Goldman Sachs Asset Management, believes this employment report is "mixed," as the overall job growth in January was weak, while previous revisions were high, and the unemployment rate slightly decreased in January, so "the Fed may proceed with caution and not overinterpret today's report."

Bloomberg economist Anna Wong commented, "The unexpectedly weak January employment report indicates that the labor market is now the main source of downward inflationary pressure in the U.S. economy. The downward revisions from institutional surveys were smaller than we expected, but they imply that employment levels at the end of 2024 will be much lower than real-time data, while the significant upward revision in household surveys indicates that labor supply is much higher. We maintain our baseline forecast that the Fed will cut rates by 75 basis points this year."

Focus on the Impact of Trump's Policies on the Labor Market, Especially Immigration and Tariffs

Commentators believe that the impact of the Trump administration's policy directives on the labor market remains to be seen, as any restrictions on immigration or repatriation of immigrants will constrain the key drivers of job growth in recent years.

J.P. Morgan analysts stated that the slowdown in immigration could "quickly begin to affect wage growth, potentially impacting the employment report in February."

The Wall Street Journal reported that, for the U.S. labor market, tariffs are another source of uncertainty brought by the Trump administration, in addition to immigration policy. Guy Berger, Director of Economic Research at the Burning Glass Institute, predicts that tariffs will have an overall negative impact on job growth.

Tombs from Pantheon Macroeconomics warned that, given the weak hiring indicators and increased uncertainty surrounding the Trump administration's economic policies, Pantheon still expects job growth to "recede."

White House Press Secretary Levitt stated that this non-farm payroll report shows that the economic conditions during Biden's administration are much worse than people think, highlighting the necessity of the Trump administration's growth-promoting policies