U.S. National Economic Council Director Kevin Hassett said that as population growth slows, U.S. job-growth figures are expected to decline in the coming months, which is consistent with the current strong pace of GDP growth. If a series of readings comes in below past levels, there is no need to panic, because population growth is falling while productivity growth is accelerating rapidly.

The January employment report scheduled for release on Wednesday is expected to show employers added 70,000 jobs, with the unemployment rate expected to hold steady at 4.4%. The report will also include historical revisions and is expected to show that nonfarm payroll growth over the year through March 2025 will be revised sharply lower. The pace of job growth needed each month to keep the unemployment rate stable is far lower than it was during the Biden era. Meanwhile, GDP growth is very strong, with the year-end growth rate expected to reach 4.0% and full-year growth at 3.0%. BMO Capital Markets’ chief U.S. economist said this year’s annual benchmark revision will be more impactful than usual. The labor market currently appears to be on a knife-edge between net job growth and job losses.

The report is produced by the Bureau of Labor Statistics and was originally scheduled to be released on February 6, but was delayed due to a partial government shutdown. When releasing the annual January employment report, the BLS benchmarks payroll employment using the Quarterly Census of Employment and Wages, which is more accurate but lagged. In addition to adjusting the employment level through March 2025, the agency will also publish revised monthly employment changes for each month of the prior year.

Last year, the labor market was viewed as gradually weakening, and economists described it as a low-hiring, low-layoff environment. But these revisions may indicate that the slowdown in hiring was more severe than previously thought.

This could change the Federal Reserve’s view of the labor market. Powell recently described it as showing signs of stability. While he acknowledged that job growth may have been overstated, he believes the economy is robust enough to keep interest rates unchanged for now. However, Fed Governor Waller holds a different view. In explaining why he voted for a rate cut at the January meeting, Waller said the revised data could show that job growth last year was close to zero.

Market Interpretation:

On the four-hour timeframe, the U.S. dollar index met resistance and pulled back, with the MACD lines and histogram contracting below the zero axis. Data released last week supported a dollar pullback. The number of layoffs announced by U.S. companies in January hit the highest level for the same period since the Great Recession, while December job openings also fell to the lowest level since 2020.