U.S. jobs and wages grow twice as fast as forecast in January

According to the Department of Labor, non-farm payrolls surged by 353,000 in January, against economists' forecasts for an increase of 180,000.

That was on top of an upwardly revised gain of 333,000 in December, which had originally been reported as an increase of 216,000.

Average hourly earnings meanwhile shot higher by 0.55%, which was also nearly double the 0.3% consensus forecast.

Friday's jobs figures appeared to mark a return to the pattern of historically unusually large revisions to previous months' data seen around the turn of the preceeding year.

Worth noting the latest data included revisions to the Establishment survey data for the last 13 months as a result of the annual benchmarking revisions and the updating of seasonal adjustment factors.

The January 2024 household survey data also reflected up-to-date population estimates.

Unemployment, which is derived from the household survey, was unchanged at 3.7% and the participation rate was steady at 62.5%.

Andrew Hunter at Capital Economics judged that markets were no longer convinced that the Federal Reserve would cut interest rates in May, "let alone March".

Yet he believed that the "rapid decline in inflation should still be enough on its own to warrant a gradual easing of policy soon".

He also said that the decline in hours worked might be the result of unseasonably cold weather, which may also have impacted on the wage data due to its impact on lower-wage occupations.

For his part, Ian Shepherdson at Pantheon Macroeconomics believed that a March rate cut was now "stone dead", although he still expected a cut in May.

Conceding that he was left scratching his head, Shepherdson went on to explain that January was the hardest month to forecast because the movement in unadjusted payrolls was four times the average for other months.

Furthermore, the NFIB survey appeared to be indicating that "a game-changing shift in job growth is coming, soon, and the sell-off in Treasuries triggered by today’s report will reverse in time."

For her part, Nancy Vanden Houten at Oxford Economics chipped in saying: "there is too much noise in the January data to change our call for the Fed to start cutting rates in May."

Vanden Houten also pointed out that the recent increase in the minimum wage in 22 states may have been a factor behind the jump in wage gains last month.