US: January employment report topped expectations in nearly every way possible – Wells Fargo

The official employment report showed better-than-expected numbers in January. Nonfarm payrolls increased by 467K despite the headwinds posed by record-high COVID cases in January, said analysts at Wells Fargo. They explain employment growth was broad-based across most industries, and upward revisions to the previous two months suggest that recent momentum in hiring remains very strong. They expected the FOMC to raise rates in March.

Key Quotes: 

“The labor market’s recovery easily leapt over the hurdle thrown up by the Omicron wave in January. Nonfarm payrolls bested even the top end of expectations, rising by 467K. The net 709K revision to the prior two months’ gains was also impressive. However, some of that can be attributed to the payroll benchmark revisions incorporated in today’s report, which showed the jobs recovery progressing more slowly during the spring and early summer than previously reported and faster more recently.”

“This morning’s employment report was likely music to the ears of FOMC officials. Solid employment gains despite the Omicron variant’s emergence give Fed officials more evidence that the U.S. economy is getting better at dealing with the bumps in the road from the pandemic. Additionally, surging wage growth and rebounding labor force participation likely reassure the more dovish monetary policymakers that the recent hawkish pivot from the Federal Reserve was the correct call.”

“Perhaps the February employment report to be released on March 4 will show some payback, but we believe it would take nothing short of a complete collapse to derail the Fed’s near-term tightening plans at this point. The first federal funds rate hike since 2018 appears to be a lock for March.”
 

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