US job growth slowed more than expected in January, with a 4.0% unemployment rate likely giving the Federal Reserve cover to hold off cutting interest rates at least until June. Nonfarm payrolls increased by 143,000 jobs last month, following robust gains of 307,000 and 261,000 in December and November, respectively.
The moderation in job gains suggests that an immigration crackdown and broad tariffs on imported goods being pursued by President Donald Trump could severely curtail the labor market and economy. The uncertainty has led to fears of higher prices from tariffs, which have sent consumers’ 12-month inflation expectations soaring.
Despite this, labor market resilience has given the Fed room to pause its rate cuts while policymakers assess the impact of the Trump administration’s policies, including tax cuts, which economists view as inflationary. Average hourly earnings jumped 0.5% in January, the most since August, with wages increasing 4.1% year-over-year.
The household survey showed the unemployment rate at 4.0%, the lowest since May, while social assistance payrolls rose by 22,000 jobs and government employment increased by 32,000 positions. However, momentum in this category is likely to slow considerably amid the new administration’s moves to slash federal government jobs.
The Fed left its benchmark overnight interest rate unchanged in the 4.25%-4.50% range last month, having reduced it by 100 basis points since September, when it embarked on its policy easing cycle. Financial markets are expecting a rate cut in June.
Source: https://www.reuters.com/markets/us/us-job-growth-misses-expectations-january-unemployment-rate-40-2025-02-07