US employment data - better than forecasts. Why the analyst thinks: the market is "frozen"

Employment growth in the United States accelerated in January and exceeded economists' expectations more than twice. A total of 130 thousand new jobs outside the agricultural sector appeared last month after 50 thousand a month earlier, according to data from the Bureau of Labor Statistics of the U.S. Department of Labor. While analysts expected to see this figure in January at 55 thousand (according to The Wall Street Journal) and 70 thousand, according to the estimates of economists surveyed by Reuters.

Publication of the report was delayed for several days because of last year's government shutdown, the Wall Street Journal points out.

The unemployment rate fell to 4.3% in January, instead of remaining at 4.4% as economists had forecast.

The stronger-than-expected job growth is attributed to the fact that seasonally sensitive industries such as retail and delivery services hired fewer temporary workers for the holiday season than usual last year. Given the low level of seasonal hiring, there were likely fewer layoffs, which contributed to the job growth, Reuters explains.

Despite an increase in jobs in January, the labor market remains sluggish and struggling even though economic growth has been robust, the agency points out. "Latent labor market tightness is higher than the overall unemployment rate indicates. Wage growth is slowing, it has become harder to find a job after being laid off, and graduates are finding it harder to find employment. Although the economy looks overheated on paper, the labor market is still largely frozen," said KPMG chief economist Diane Swank (quoted by Reuters).

"The current picture of U.S. economic success is neither broad nor deep, making it vulnerable to a reality check in the future," agrees Quilter investment strategist Lindsay James (quoted by Bloomberg).

However, a future possible deterioration in the labor market could be a positive for the broad stock market if guided by historical analogies, says Jim Paulsen, author of the Paulsen Perspectives newsletter. In his view, cited by Bloomberg, investors tend to take weak employment data as a signal that the U.S. Federal Reserve will support the economy by cutting interest rates, a scenario that many on Wall Street expect this year.

"As soon as there is stimulus from policy, regardless of whether the economy ultimately leads to a recession, the stock market starts to look toward a new recovery cycle and investors start pushing stock prices higher," Paulsen said.

Futures on the S&P 500 fell 0.3% after the publication of the employment report, futures on the Nasdaq 100 lost 0.6%. Contracts on the Dow Jones Industrial Average rose by 0.1%.

Investors still see June as the most likely time for the Fed's next rate cut, but they now estimate a nearly 40% chance that the regulator will keep the rate unchanged - versus about 25% before the January jobs report, Reuters writes.

This article was AI-translated and verified by a human editor