US Jobs Data: What Do Stock Markets Want to See?
US Jobs Data: What Do Stock Markets Want to See?
By:Ilya Spivak
Will stock markets find enough to like in US jobs data? It’s all about Fed interest rate cut expectations.
- All eyes are on January’s US jobs data and its impact on Fed rate cut bets
- Leading indicators hint the labor market is starting 2026 on weak footing
- Markets may be disappointed if the data fails to amplify dovish pressure
Wall Street is waiting with bated breath as all eyes turn to January’s US jobs report. It is first of two banner data releases this week that will together shape Federal Reserve interest rate cut expectations and steer sentiment across global markets. Consumer price index (CPI) figures mark the second key inflection point, due Friday.
The Bureau of Labor Statistics (BLS) usually publishes employment data on the first Friday of each month. This release was delayed by a funding lapse amid Congressional budget negotiations. A rise of 70,000 in nonfarm payrolls is expected, a slight pickup from December’s gain of 50,000. The unemployment rate is seen holding steady at 4.4%.
The US labor market seems to be struggling
A slew of grim labor market indicators spooked investors last week. Job openings unexpectedly plunged to 6.54 million in December, the lowest since September 2020. Meanwhile, US firms announced 108.4k in layoffs last month – the most since October and the largest for any January since 2009 – according to Challenger, Gray and Christmas, Inc.
The flood of worrying statistics did not stop there. An estimate of private sector payrolls growth from Automatic Data Processing, Inc. (ADP) showed that a meager 22k jobs were added in January, the least in three months. Initial jobless claims jumped ominously higher at the end of the month.
Taken together, all this seems to endorse the Fed’s logic for cutting interest rates to underpin a wavering labor market. Central bank officials are betting they can do this as price growth for services continues to slow while the impact of tariffs on goods inflation fades from calculations, bringing their 2% target into view.
Markets want US jobs data to back more Fed rate cuts
The markets are pricing in 57 basis points (bps) in cuts this year, implying at least two 25bps cuts are firmly on the menu. Fed officials have only signaled one cut for 2026, and Chair Powell has forcefully pushed back on dovish speculation. The S&P 500 has been stuck in a choppy range since he chastised traders in late October.
Powell has argued that BLS overcounting of payrolls now amounts to about 60k per month. Applying that haircut to January’s forecast leaves a rise of 10k. That’s hardly rich, but it is better than last year’s average of monthly 5k loss. That seems sufficient to leave intact the Fed’s dovish bias, but not to spur officials into action.
A jobs report that leaves stock markets without fresh fodder to fuel rate cut speculation may translate as a disappointment. Selling pressure may build in earnest if an upside surprise wreaks havoc on positioning and sends traders scrambling. Citigroup analytics show US data outcomes have firmed relative to forecasts so far in 2026.
Ilya Spivak, tastylive head of global macro, has over 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
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