On the January Jobs Report

130,000 net payrolls was a big beat, and it is affirmed by our multi-factor model. The annual benchmarking exercise reduced the total number of payrolls by 1 million, 403,000 of which was assigned to 2025. January 2025 now joins June, August and October as a month of payroll contraction (still no consecutive months). This was all expected, and all in the past. More than all the payroll growth in January was in the private sector, with a contraction of 42,000 government payrolls. Wage growth was modest, given a sharp downward revision to December. Rate cut expectations tightened somewhat this morning, but we still forecast three cuts in 2026. Immigrant employment rose sharply and native-born employment fell, but the data comes from the less reliable “household survey” and is not seasonally adjusted, which is especially important in January.