Economists expect non-farm payrolls to increase by 170,000 jobs in January after a 256,000-job increase in December. The unemployment rate (UE) is likely to remain at 4.1% over the same period.
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Meanwhile, average hourly earnings (AHE), a closely watched measure of wage inflation, is expected to rise 3.8% year-over-year (YoY) in January compared to December’s 3.9% rise.
After the January policy meeting, the Fed kept the benchmark policy rate in the 4.25%-4.50% target range but changed the language in the policy statement to a slightly hawkish tone. The US central bank removed an earlier statement that said inflation has “made progress” toward its 2% inflation target, while only the pace of price growth “remains elevated.”
Fed Chairman Jerome Powell said in his post-policy press conference that the Fed wants to see further progress on inflation and can see a path to it, adding, “We don’t need to rush into making any adjustments.”
Despite the hawkish hold, markets are expecting a Fed rate cut of 46.3 basis points (bps) by December, according to LSEG data, with a quarter-point cut for July being entirely reasonable. Therefore, January’s employment data hold the key to confirming the strength of the US labor market, which is likely to have a strong bearing on Fed rate cut expectations for this year.
Previewing January’s Employment Situation report, analysts said: “Payrolls are set to lose momentum in early 2025, with temporary setbacks helping keep headline gains below the 200K mark.”
“The UE rate likely remained unchanged at 4.1%. The BLS will also reveal material revisions to payrolls and household employment data,”.
