Past non-farm payrolls are just prologues, "Te Ma" reform, the biggest disturbance

The non-farm payroll data in January is often analyzed in two directions: on one hand, the current data, and on the other hand, the revisions of previous data. At present, whether it is the former or the latter, we believe there is no need for excessive interpretation.

The January non-farm statistics week is earlier than Trump's inauguration, and rather than treating it as the beginning of the Trump 2.0 era, it is better to see it as the end of the Biden era. Moreover, the various policy reversals and unpredictability in the nearly three weeks since Trump took office have further weakened the macro significance of economic data: Past non-farm data is merely a prologue.

The important data from the past week (small non-farm, PMI) had the lowest impact on the US dollar index and 10-year US Treasury bonds in recent months; in contrast, the influence of some non-economic fundamental factors has become greater, especially Trump's remarks regarding tariffs, immigration, and executive orders.

Coincidentally, about two and a half hours after the non-farm report was released, according to Reuters, Trump is expected to announce "reciprocal tariffs" this Friday; about an hour and a half later, Trump personally announced that he would disclose information on reciprocal tariffs next week. The US dollar index showed a significant upward trend at both of these points, contrasting sharply with its movement after the non-farm data release.

This also fully reflects the US market's "insensitivity" to economic data and "sensitivity" to any Trump-related news, entering a "Trump is everything" moment.

Returning to the non-farm data itself, the shortfall in new jobs is the only obvious weakness (143,000 people, expected 175,000 people). However, considering the upward revision of 100,000 jobs for November and December, from a three-month average perspective, the new jobs in non-farm data are still in a robust upward trend; and the level of 143,000 people is not disappointing.

From the perspective of the unemployment rate, the unemployment rate of 4.01% at least indicates that there is currently no significant pressure on internal momentum. According to estimates provided by the BLS, without annual revisions, the unemployment rate in January would decrease by 0.2 percentage points to 3.9% Considering that the U.S. manufacturing PMI recorded 50.9 in January and manufacturing employment has returned to positive territory, this combination also confirms our judgment in the previous non-farm report ("A Friendly Discussion on the Unemployment Rate of 4.1%"). If the manufacturing PMI and employment show sustained recovery, the U.S. unemployment rate will face downward rather than upward risks.

From the perspective of wages, the month-on-month increase in hourly wages (0.5%, expected 0.3%) and the high year-on-year growth (4.1%, expected 3.8%) are accompanied by a decline in working hours to the lowest level since the pandemic (equal to January 2024). The "high wages, short hours" situation is related to the impact of extreme weather.

The continuously rebounding MA3 new non-farm employment, stable wage growth, and low unemployment rate all point to a U.S. economy that was not highly volatile before Trump's presidency, with Trump himself being the amplifier of that volatility.

The attitude of the Trump administration towards reform is "to know the difficulties and move forward." As of February 5, about 40,000 federal employees have accepted the "buyout plan," and the potential cuts to the U.S. Agency for International Development (USAID) will affect the employment of over 10,000 people. This "quick and decisive action" exemplifies the "to know the difficulties and move forward" approach, and federal layoffs are just one aspect of Trump's comprehensive efficiency reform. ("Trump's Reform: Who's Cheese Will Be Moved?")

Therefore, the non-farm data only reflects that the "foundation of the U.S. economy is good" before Biden's departure, and does not imply that "tomorrow will be better" after Trump takes office.

In the short term, the biggest disruption to the U.S. economy is the continued unexpected advancement of "Trump's reforms," but from Trump's perspective, this could be the largest reform in U.S. history, essential for the medium to long-term improvement of U.S. economic efficiency and fiscal sustainability, and is also aimed at reshaping his vision of the "Golden Age."

Under the pursuit of Deepseek, the U.S. "AI narrative" is also facing challenges. Although Trump attempts to accelerate the realization of the "AI narrative" through the Stargate plan, the success or failure of the "AI narrative" is not determined by Trump's will, but rather affects the cost of "Trump's reforms." In 1611, the classic line from Shakespeare's last play "The Tempest" resonates with the current situation in the United States: "What's past is prologue."

In 2025, under the rule of "Trump," America also looks forward to perfect reforms, but historically, reforms have often faced obstacles. How much chaos will this unprecedented reform bring? It is worth ongoing attention.

Author: Song Xuetao (S1110517090003), Zhong Tian, Source: Xuetao Macro Notes, Original Title: "What’s past in non-farm payrolls is prologue"

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