The January jobs report did little to change the Federal Reserve’s calculus on interest rates. January’s nonfarm payrolls data reported Friday showed a rosy but not exceptional picture of the labor market. The headline number was a miss, with the U.S. economy adding 143,000 jobs in the month, lower than the 169,000 expected by economists polled by Dow Jones. But wage growth came in stronger than expected, the unemployment rate ticked lower to 4%, from 4.1%, and December jobs gains were revised higher. Market observers expect that will likely keep the Fed on pause for the time being, as it waits to see how trade and tax policies from the Trump administration could affect an economy that is largely in a good place. Market pricing of just one interest rate cut coming this year ticked slightly higher following the report, according to the CME FedWatch Tool . “Overall, despite the disappointing headline miss, the underlying details were strong,” said Ian Lyngen, managing director and head of U.S. rates strategy at BMO Capital Markets Fixed Income Strategy team. “This data is consistent with the Fed remaining on hold.” Glen Smith, investment chief at GDS Wealth Management, said the Friday report is unlikely to “derail the Federal Reserve’s patient stance” when it comes to interest rate cuts: “We would need to see multiple weaker jobs reports in a row in order for the Fed to cut interest rates sooner.” Bryce Doty, senior portfolio manager at Sit Investment Associates, expects that the report will keep the Fed on hold for “probably one more meeting.” He also noted that a rise in yields, possibly from wage growth that’s expected to pressure inflation, is still unlikely to rattle the bond market. “Expect yields to drift higher as investors digest the details,” Doty added. “However, we doubt this report is strong enough to push yields back up to the recent high.” A number of one-time disasters and weather events, such as the California wildfires and a severe cold snap in broad swaths of the U.S., are expected to have also affected the January report. Lindsay Rosner, head of multisector fixed income investing at Goldman Sachs Asset Management, wrote, “we think the Fed is likely to be cautious about reading too much into today’s report.” — CNBC’s Jeff Cox and Yun Li contributed to this report.
