For the Federal Reserve and the US financial market, January's non-farm data will not only be a key reference for the performance of the US economy at the beginning of the year, but also the first blockbuster indicator to fully and intuitively reflect the impact of the Epidemic on the US labor market. And in the end, the performance of the January non-farm payrolls data unexpectedly far exceeded market expectations...
The U.S. Department of Labor reported a 467,000 increase in nonfarm payrolls in January, the biggest increase since October last year and well above market expectations of 150,000, according to data released friday by the U.S. Department of Labor. In December, non-farm work was also revised up from 199,000 to 510,000.
For other sub-indicators, the US unemployment rate recorded 4% in January compared to 3.9% in the previous month, and the unemployment rate rebounded for the first time since June 2021.
The employment participation rate rose slightly to 62.2 percent in January from 61.9 percent in the previous month, and while still below pre-pandemic levels, it has improved significantly from a low of 60.2 percent during the pandemic.
It is worth mentioning that the employment report also shows that the average hourly wage in the United States in January increased by 5.7% year-on-year, far exceeding the market expectation of 5.2%, and also significantly higher than the previous value of 4.7%. Soaring wages could lead the FOMC to favor a more aggressive end to monetary easing, fearing a situation similar to the wage-price spiral of the 1970s.
The U.S. Labor Agency said U.S. jobs in the leisure and hospitality, professional and service industries, retail trade, transportation and warehousing all recorded increases.
After the release of the Non-Farm Payrolls data in January, there was a quick knee-jerk reaction in global financial markets. Among them, the dollar index surged more than 30 points in the short term, refreshing the intraday high of 95.62.
U.S. 2-year and 5-year yields rose to new highs this year. The real yield on the US 30-year Treasury rose above zero.
Spot gold prices fell sharply in the short term, hitting the $1800/oz mark. COMEX's most active gold futures contract on February 4, 21:39 Beijing time instantly traded 2251 lots in one minute, with a total trading contract value of $405 million.
U.S. stock futures also fell short-term, with S&P 500 futures down 0.22% in the latest.
The data far exceeded market expectations
In fact, although economists surveyed by the media generally expected that this non-farm payrolls data was expected to add 150,000 people before the release of the data, the upper and lower range of the forecast was extremely large (between -400,000 and 250,000). However, even the strongest market expectations do not show the final performance of this data.
Some industry insiders even worried in advance that the non-farm payrolls data could fall into negative territory, and even the White House issued a warning earlier this week. Brian Deese, director of the White House National Economic Council, said tuesday that the data collection date for the January non-farm payrolls report included the peak of absences due to illness after public holidays. This figure can be "confusing" as the loss of people from COVID-19 infection will be registered as unemployed.
Previously, the ADP data released on Wednesday, known as "small non-farm", also performed sluggishly. Private jobs fell by 301,000 in January, the first decline since December 2020, and an increase of 776,000 in December. Economists had expected private jobs to increase by 207,000.
However, the final strong performance of non-farm payouts undoubtedly indicates that these prior worries are unfounded. After the release of non-farm payrolls data, US federal funds rate futures showed that the probability of a 50 basis point rate hike by the Fed in March was as high as 35%, compared with 18% previously.
At present, there are signs that the Fed may be a foregone conclusion in March, and the suspense is only between a 25 basis point and a 50 basis point hike. Fed Chairman Jerome Powell was "hawkish" at a rate meeting at the end of last month, suggesting that the Fed was ready to raise interest rates in March and did not rule out the possibility of raising interest rates at every future policy meeting to cope with inflation at decades-highs.
Analyst Douglas Zehr said, "The question now is whether such a strong report will get people to talk again about a 50 basis point hike in March. We doubt the Fed will take such action, but the market may set the price for some opportunities. ”