US January Nonfarm Payrolls: A Closer Look at the Numbers

The US Bureau of Labor Statistics (BLS) is set to release the January 2025 Nonfarm Payrolls (NFP) data on Friday, February 7, 2025, at 13:30 GMT. This crucial labor market indicator will provide valuable insights into the US economy's health and potentially influence the Federal Reserve's (Fed) interest rate outlook and the US Dollar's (USD) performance. Let's break down the key aspects of the upcoming NFP report and analyze its potential implications.

Expected Job Growth and Unemployment Rate

Economists anticipate a slowdown in job growth for January 2025, with expectations ranging from 60,000 to 250,000 new jobs, compared to the bumper 256,000 reading in December 2024. The median consensus estimate stands at 175,000 new jobs. The unemployment rate is expected to remain unchanged at 4.1%.

Average Hourly Earnings

Average hourly earnings (AHE) are expected to rise by 3.8% year-over-year (YoY) in January 2025, compared to December 2024's 3.9% growth. The range of expectations for the month-over-month (MoM) change in AHE is between 0.1% and 0.4%.



Potential Market Impact

The NFP report can trigger significant market movements, particularly in the stock market. A disappointing headline NFP print could revive dovish Fed expectations, leading to a sell-off in global stock markets. Conversely, an upside surprise in NFP and wage inflation data could affirm the Fed's hawkish tone, fueling a fresh recovery in the USD and driving the EUR/USD pair back toward 1.0250.

Downward Revisions and Their Implications

The upcoming NFP report also includes annual revisions, which could have significant implications for the Fed's interest rate outlook and market sentiment. Analysts expect a large upward increase in the US population, boosting the size of the US labor market by 2.5 million people. This could lead to a further 234,000 downward revision to the household survey, which is used to create the unemployment rate. If the unemployment rate is revised higher, it could indicate that the labor market is softer than expected, which could help the disinflationary process in the US and justify a faster pace of rate cuts from the Fed.

In conclusion, the upcoming US January 2025 NFP report holds the key to affirming the strength of the US labor market and influencing the Fed's rate cut expectations for this year. Investors and market participants should closely monitor this crucial labor market indicator, as it could have significant implications for the US economy, the Fed's interest rate outlook, and global financial markets.