US jobs report surprises with 130,000 hires in January as rate cut hopes fade

• Healthcare led job growth with 82,000 new positions, while federal government employment fell by 34,000, continuing a decline of over 327,000 jobs (11%) since October 2024
• Stock futures rose following the report, with S&P 500 futures up 0.4% and the 10-year Treasury yield jumping nearly 5 basis points to 4.19%
• Analysts say the strong jobs data significantly weakens the case for imminent Fed rate cuts, with the labor market appearing more resilient than recent expectations suggested

Summary: US Jobs Report Exceeds Expectations, Dampens Rate Cut Outlook

US employers added 130,000 jobs in January 2026, more than doubling economist forecasts of 55,000-65,000 new positions. The unemployment rate declined to 4.3% from the expected 4.4%, signaling unexpected labor market strength.

Market Reaction:

• S&P 500 and Nasdaq 100 futures rose 0.4%
• Dow Jones futures gained 163 points (0.3%)
• 10-year Treasury yield jumped 5 basis points to 4.19%

Key Sector Data:

Healthcare led job gains with 82,000 new positions, while construction and social assistance also showed increases. Federal government employment fell 34,000, bringing total declines to 327,000 (11%) since October 2024. Financial activities sector also shed jobs.

Critical Revision:

Annual benchmark revisions revealed significantly weaker historical performance—the US economy added only 181,000 jobs in 2025, down sharply from the previously reported 584,000.

Labor Market Indicators:

• Labor force participation remained flat at 62.5%
• 7.4 million Americans unemployed
• Long-term unemployment steady at 1.8 million (25% of total unemployed)
• Part-time workers for economic reasons fell 453,000 to 4.9 million

Fed Policy Implications:

Analysts suggest the strong report diminishes the case for imminent Federal Reserve rate cuts. Strategists noted that absent sustained inflation deceleration, labor market strength alone won't justify easing. The data complicates incoming Fed Chair Kevin Warsh's positioning ahead of the March meeting, with markets now pricing in an extended pause on rate reductions.