Job Growth Sizzled to Start the Year. Here's Why It's Unlikely to Impact Interest Rates

The word "jobs" written in wooden letters that are placed on top of a laptop keyboard

The January jobs report came in much higher than expected, alleviating fears of a sharp slowdown in the labor market. The data also strengthens the case for the Federal Reserve to keep interest rates unchanged for the foreseeable future; certainly through the remainder of Jerome Powell's term as Fed chair, which is up in May.

According to the Bureau of Labor Statistics (BLS), nonfarm payrolls rose by 130,000 in January, more than double economists' estimates for roughly 55,000 new jobs.

The figures for November were revised down by 15,000, from +56,000 to +41,000, while job growth for December was lowered by 2,000, from +50,000 to +48,000. The revisions resulted in a combined 17,000 fewer jobs than previously reported.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just ~~$107.88~~ $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/flexiimages/y99mlvgqmn1763972420.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

As for January, job gains were seen in health care (adding 82,000 jobs), social assistance (+42,000) and construction (+33,000). Federal government jobs declined by 34,000 in December, and are now down 327,000, or 10.9% since their October 2024 peak.

The unemployment rate, which is calculated from a separate survey, fell to 4.3% from 4.4% in December.

One noteworthy data point is that wage growth, a measure of inflation, was 0.4% higher compared to the final month of 2025 and up 3.7% year over year.

Also included in the January jobs report, which was delayed from its initial release due to the short-lived government shutdown, were benchmark revisions to previously reported nonfarm payroll numbers.

This update showed that 898,000 fewer jobs were created in the year prior to March 2025, lower than the 911,000 initially estimated in September. Job growth for 2025 was revised down by 403,000.

"Markets may have been expecting a downshift in today's numbers after last week's soft data, but the jobs market hit the gas pedal instead," says Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. "Today's data shows an acceleration in employment that was strong enough to drive unemployment lower – vindication for Chair Powell's holding pattern."

And the Fed is expected to remain on hold for at least its next two meetings. According to CME Group's FedWatch, futures traders are now pricing in a 94% chance the Fed will keep the federal funds rate unchanged when it meets in March, up from 80% one day ago. Betting odds are for the first rate cut of 2026 to come in June.

With the January jobs report now in the books, here's some of what economists, strategists and other experts around Wall Street have to say about the results and what they could mean for the Fed and investors going forward.

Experts' takes on the January jobs report and what it means for the Fed

several multi-colored paper airplanes going in all directions with a yellow airplane flying straight out of the chaos

"January's employment report was strong, which likely keeps the Federal Open Market Committee (FOMC) on hold for now. The bigger implication may be for stocks. A stronger job market will support the 'broadening trade' – the rotational to industrial cyclicals and consumer discretionary from technology. We like homebuilders, REITs and luxury goods as potentially under-appreciated beneficiaries of stronger growth." – Brad Conger, Chief Investment Officer at Hirtle Callaghan

"The January payroll report was a big one since it's been a while coming and we got massive revisions. But this isn't a big surprise since we already knew the labor market was weak last year. The good news is that the economy created 130,000 jobs in January, well above expectations – while that could be suspect given revisions, the unemployment rate (which isn't revised) fell to 4.3%. That means the labor market is not weakening further and the Fed isn't going to cut rates again anytime soon – that's the big picture." – Sonu Varghese, Vice President, Global Macro Strategist at Carson Group

"The great news from last month – twice as many jobs were created in January as expected – could easily be overshadowed by the final revisions number of -862k. However, if the recent jitters in the stock market are due to concerns of a weakening labor market and/or economy that is headed toward a recession, this report should alleviate those concerns in the short run." – Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management

"The January jobs report was full of positive surprises this morning, sending S&P 500 futures higher and lifting the 10-year Treasury yield from a five-week low. Market participants are paring back expectations for additional Fed rate cuts, settling back to two cuts by year's end. Despite labor market softening observed last year, we believe economic strength coming out of 2025 and carrying into this year should leave companies reluctant to fire, while tight labor supply should keep a lid on the unemployment rate." – Jennifer Timmerman, Senior Investment Strategy Analyst at Wells Fargo Investment Institute

"The economy is still churning out jobs, and there is little reason to be concerned about the labor market. The fundamentals are working in your favor – cooling inflation, strong earnings, plenty of consumer and enterprise spending and a Fed that's likely to give us 2-3 cuts. Pullbacks will happen and are buying opportunities. The market climbs a wall of worry, and the investors who stay disciplined are the ones who benefit. My year-end targets remain S&P 7,700 and Dow 55,000 – even through a 'sawtooth year' that likely includes a sharp 5-15% pullback. That conviction hasn't changed." – Robert Edwards, Chief Investment Officer at Edwards Asset Management

"The market got the jobs report it needed. Ultimately, this print is an indication that the feared softness in the labor market is not materializing and that the strong productivity-led economic growth we are experiencing is not coming at the cost of jobs. Despite tight spreads and elevated multiples, we view this as a favorable backdrop for risk assets." – Brad Smith, Portfolio Manager at Janus Henderson Investors on the Core Plus and Corporate Credit Teams

With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.