NEW YORK (Reuters) – U.S. job growth accelerated sharply in January amid a persistently resilient labor market, but a further moderation in wage gains should give the Federal Reserve some comfort in its fight against inflation.
The Labor Department’s closely watched employment report’s survey of establishments on Friday showed that nonfarm payrolls surged 517,000 jobs last month. Data for December was revised higher to show 260,000 jobs added instead of the previously reported 223,000.
MARKET REACTION:
STOCKS: U.S. stock index futures fell sharply after the strong jobs reportBONDS: U.S. bond yields surged after the jobs data.
FOREX: The dollar gained after the data.
COMMENTS:
QUINCY KROSBY, CHIEF GLOBAL STRATEGIST, LPL FINANCIAL, CHARLOTTE, NORTH CAROLINA
“Certainly it’s way above the consensus estimate. This is not what the market wants to see, nor is it what the Fed wants to see at this stage.”
“This is the kind of report that you want to see when coming out of a recession to signal strength in the economy, not when the futures market is looking at the Fed finishing its rate hike cycle.”
BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, ALLSPRING GLOBAL INVESTMENTS, WISCONSIN”Whenever we see these big numbers, especially with the headlines, the fear of the Fed comes back with a vengeance because people are probably afraid that the Fed is going to push things even further than what they have, running the risk of not a soft landing, but more of a car crash.”
“Chair Powell was changing his feathers from being a hawk to a dove (in the previous session), and now this type of data could suggest he’s going to transform back into a hawk again.”
“The fears in the near term are that the Fed is going to do too much and try to maybe push their target rate well above 5% instead of trying to stick the landing at something closer to where we are now, around 5%. In the longer term, it’s about whether or not we’re going to have a very slow recovery. If the Fed tries to hike and hold for too long then that can make an eventual economic recovery much weaker.”
RUSSELL PRICE, CHIEF ECONOMIST, AMERIPRISE FINANCIAL, TROY, MICHIGAN
“After the initial shock, I recovered. It certainly has mixed messages for the Fed, but generally speaking, it’s not an especially Fed-friendly report. Certainly, demand for workers is trending in the direction the Fed does not want to see. But the average hourly earnings were down from the month prior, the year-over-year growth, so that provides some comfort.”
“For most purposes (jobs growth) was well distributed. What it shows is the resiliency of the job market right now and the demand for workers in this environment remains remarkably strong.”
“This make the Fed’s job more difficult. Their dependence on the data yet to come has increased, no doubt. They’re concentrating on the labor market right now, they want to see labor cost inflation under control, and this report does not suggest that labor cost inflation in particular is going to improve significantly anytime soon.”
JOE SALUZZI, CO-MANAGER OF TRADING, THEMIS TRADING, NEW JERSEY”(The NFP numbers) were a lot better than expected. So much that I thought the market would get hit a lot more on that.”
“It is not the best news for inflation, but it is pretty good news for the economy. Depending on what you want to look at and depending on how you spin the numbers, you can read into it either way.”
“After the Fed spoke earlier this week, some people were thinking there would be one more rate hike and everybody else is maybe thinking done. But you have readjust now based on these numbers. I think most people are going to come out and say, there is going to be at least one more (rate hike) coming in especially with this type of number and then we’ll see from there.”
BRANDON PIZZURRO, DIRECTOR OF PUBLIC INVESTMENTS, GUIDESTONE CAPITAL MANAGEMENT, TEXAS
“If anything, this (NFP) gives the Fed more fuel to continue hiking. Markets were interpreting Powell’s comments as a bit dovish and seeing a pause in March. But this gives the Fed certainly more leeway to continue hiking further and for longer.”
“That’s why futures are finally waking up to the reality of just how dire the situation could be in terms of the Fed having to really continue to push rates up.”
SHAWN CRUZ, HEAD TRADING STRATEGIST, TD AMERITRADE, CHICAGO
“One thing is the wage component, which is what people look at, actually came in more or less right where everyone was expecting. But we had this many people coming back, adding jobs as we saw labor force participation tick higher a little bit, if you think about aggregate earnings, just the pool of money being paid out to employees out there, that is going up significantly so that is going to be inflationary.”
“The other thing is, anyone who is calling for any sort of a recession now, I don’t know how you can get a recession when you are getting half a million people hired in one report, and you get upward revisions for the past two months and the breadth on the support was pretty incredible, it was almost across the board in a lot of these areas where you saw these increases. So this is kind of a blockbuster report, it is certainly going to put the Fed in a difficult spot.”
“The one thing people might look at is you do get another employment report between now and when the Fed makes any moves again in March, so maybe some people who are looking for some solace that the Fed is still getting things done, they can still engineer a soft landing, are probably going to look for significant revisions in February and maybe a little bit more of a soft report.”
THOMAS HAYES, CHAIRMAN, GREAT HILL CAPITAL LLC, NEW YORK
“I don’t think anyone expected such a jump in non-farm payroll creation so the Fed is looking to the labor market to give it an indication of when it can pause and with numbers like these, they’re going to at least have another hike, if not more, to try to cool the economy, to meet their objectives.”
“My guess is it will be revised down next month but just looking at this, no one could have expected it because you spent the last four weeks with daily headlines of companies laying off 10% of their workforce, and here we are with this pretty massive job creation.”
“Good news in the sense that the economy is much stronger than most people expect but bad news if you’re hopeful that the Fed is going to immediately pause.”
RANDY FREDERICK, MANAGING DIRECTOR, TRADING AND DERIVATIVES, CHARLES SCHWAB IN AUSTIN, TEXAS
“The non-farm payroll number was huge. The unemployment rate has fallen to the lowest level since 1969. It was 3.1% in 1953, so you have to go that far back to get lower.”
“I’m surprised to see futures dip further. We’ve seen inflation numbers come down since June of last year. If you can do that and keep the labor market strong that’s the perfect soft landing the Fed’s been looking for.”
“This number is so large it’s maybe causing concerns that the March rate higher will be higher than the 25 bps hike that was expected.”
“I’d say that market got ahead of itself betting that the March rate hike would be the last one. I’d thought that before today but this may confirm that.”
“Wages are not the concern this month it’s the increase in payrolls.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“On the surface this is a strong labor report. However, the good news is that hourly wages were basically the same as last month. We’ve had a big run up here in stock prices. So obviously this is going to deflate the recent rally.”
“In terms of interest rates, this means that at least two more rate hikes are on their way.”
“The question is, why there was such a big jump in non-farms? Was it seasonal factors or just the strength of the labor market?”
(Compiled by the Global Finance & Markets Breaking News Team)
