The January Non-Farm Payrolls (NFP) data for the U.S. labor market presented a mixed picture. While key employment indicators came in weaker than expected, some elements suggest that the labor market remains resilient.
Employment Change Below Forecasts
Employment increased by 143,000 jobs, falling short of the market expectation of 169,000. However, the previous figure was revised upward from 256,000 to 307,000, partially offsetting the weaker current data.
In the private sector, only 111,000 jobs were added, missing the expected 141,000. Meanwhile, manufacturing employment grew by 3,000, despite forecasts predicting a slight decline of 2,000. This could indicate stabilization in the manufacturing sector after previous declines (-12,000).
Unemployment Rate Drops, Wages Rise
The unemployment rate fell to 4.0%, contrary to expectations of it remaining at 4.1%. This is a positive signal, indicating a relatively strong labor market.
Additionally, average hourly earnings increased by 4.1% year-over-year, exceeding the expected 3.8%. On a monthly basis, wages grew by 0.5%, beating the forecast of 0.3%. This suggests wage pressure, which could have implications for monetary policy.
Data Revision: A Stronger Labor Market Picture
A key detail that might shift the perception of this report is the revision of data for March 2024. Previously, employment was estimated to have declined by -818,000, but the revised figure now stands at -589,000. Although a larger revision to -675,000 was expected, the smaller adjustment suggests that the labor market is not weakening as rapidly as previously thought.
Forex Market Reaction
The initial reaction to the data was negative, but as the market factored in the revision and the drop in unemployment, sentiment improved. As a result, the EUR/USD exchange rate fell to 1.035, reflecting continued confidence in the strength of the U.S. economy despite the temporary slowdown in job creation.
Post originally published in CEO Magazyn.
Source: CEO Magazyn
