THE NAGA GROUP AG The number of nonfarm payrolls (NFP) grew by 467,000 last month while the jobless rate climbed to 4% in spite of the rising number of coronavirus cases, according to the US Labor Department.
Strong jobs report…
The report showed that the increase in added jobs in January resulted in 2.9 million fewer jobs than in February 2020, prior to the coronavirus outbreak. Sectors including hospitality, retail, transportation, and warehousing added the most jobs in January, while the automotive industry has seen layoffs.
Economists were calling for a weak January jobs report as they are expecting a recovery in the labor market later this year as the number of infections eases. Employees will then be able to return to their jobs and employers will face fewer challenges, allowing them to hire new workers.
While the forecasts varied significantly, the Bloomberg consensus called for a 150,000 increase in payrolls. However, the labor market showed outstanding robustness last month, withstanding the record-high number of coronavirus cases.
Furthermore, the Labor Department said average hourly earnings climbed by 0.7% in January and up 5.7% compared to the year-ago period, fueling further concerns regarding inflation.
But all focus remains on inflation
The Fed signaled earlier that one of the key reasons why it is expected to start hiking rates in March is a historically strong labor market. The Fed is expected to raise interest rates several times this year to fight inflation, which stands at the highest levels in nearly 40 years.
The labor force participation rate surged to 62.2%, the highest since the Covid-19 break almost two years ago. The number of absent employees due to coronavirus soared to 3.6 million last month, compared to 1.7 million in December.
"While we are always hesitant to extrapolate much from a singular data point, we have to admit that today's NFP report is surprisingly strong," commented Simon Harvey, head of foreign exchange analysis at Monex Europe, to Bloomberg.
How did the market react?
Despite a big surprise to the upside, major US indexes are little changed. The Nasdaq 100 ($NAS100) index is trading about 0.2% in the red in response to the rising US 10-year yield. This is despite a massive rally in Amazon shares following earnings yesterday.
We may trade in a range today, however, traders should be cautious as investors continue to react strongly to any changes in the Fed policy expectations. For now, all eyes remain on the US inflation report that is due next week.
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NAGA Group AG published this content on 04 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 February 2022 11:49:01 UTC.
