By Gregory Heym, BHS Chief Economist and and host of Crossing The Line

It's the first Friday of the month, so let's see how the jobs market did in January.

The Line: Job Growth Less than Expected in January

Economists were looking for a gain of 169,000 jobs last month, but payrolls only rose by 143,000.

To please Sergeant Friday, let’s start with just the facts:

Employment gains in November and December were revised up by a total of 100,000. It’s been a while since we’ve seen an upward revision that high.
The unemployment rate fell to 4.0%.
Wages rose by 0.5% in January and were 4.1% higher than a year ago. Both figures were above forecast.
Job growth in January was led by health care (+44,000) and retail (+34,000).
Benchmark revisions for the 12-month period ending March 2024 reduced employment during that time by 589,000, down from the August figure of 818,000.

That’s enough facts for now, let’s get to the analysis. While employment growth in January was less than forecast and below the average monthly gain of 166,000 in 2024, the big 100,000 revision to November and December makes this a wash. Add in the decline in the unemployment rate and strong wage growth in January, and the labor market still looks very strong. By the way, we also found out this week that layoffs remain very low, another sign of a strong labor market.

What does this mean for Fed rate cuts? I don’t think this report by itself will alter their plans, which seem to be no rate cuts until the second half of 2025. That said, they will remain very data dependent going forward and any better or worse than expected data can change their plans. Speaking of their plans, while we won’t be getting a rate cut in March we will get the Fed’s updated economic projections. This will tell us how much they expect to cut rates in 2025, as well as their projections for inflation, unemployment, and economic growth for the next few years.

Mortgage Rates Fall for the Third Straight Week

I haven’t had a chance to say that in a while, so I thought I’d stick it in. The average 30-year mortgage rate fell to 6.89% from 6.95% the prior week. I know that’s not a big decline, but it is bigger than the puny 0.01% decline the week before. Slow and steady wins the race.