Breaking: US Non-farm Payrolls rise by 467K in January versus median forecast for 150K gain

• The US economy added 467K jobs in January, well above the 150K forecast, while wage growth was hotter than expected. 
• The dollar saw kneejerk strength, US yields rose and US equities fell in pre-market trade as markets upped Fed tightening bets. 

Nonfarm Payrolls (NFP) rose by 467K in January versus the median forecast for a 150K rise, data published by the US Bureau of Labor Statistics showed on Friday. That marked a slight deceleration from December's pace of job gains when 503K jobs were added (revised up from 199K). The massive headline beat on expectations was driven by a 444K rise in private nonfarm payrolls (versus the expected 150K gain). Manufacturing payrolls saw a slightly smaller than expected gain of 13K versus the 25K forecast. 

Average Hourly Earnings rose at a stronger MoM pace of 0.7% in January, above the expected 0.5% MoM gain and faster than December's 0.5% MoM gain, which had been revised lower from 0.6%. That helped push the YoY rate of Average Hourly Earnings growth to 5.7% from 5.0% in December (which had been upwardly revised from 4.7%). That was well above the expected  YoY rate of 5.2%. 

The unemployment rate unexpectedly rose a tad to 4.0% from 3.9% in December, against expectations for it to remain unchanged. But the U6 Underemployment Rate continued to decline, dropping to 7.1% in January from 7.3% in December. Meanwhile, the participation rate jumped to 62.2% from 61.9% in December, taking it to within 1.2% of its pre-pandemic levels.  

Market Reaction

The much stronger than expected headline job gain, combined with unexpectedly high wage growth and still very robust labour market slack figures has seen the US dollar jump higher in recent trade. The DXY, which was trading around the 95.30 mark prior to the data, has lept to session highs above the 95.50 level, though still trades down about 1.7% on the week and remains on course for its worst week since March 2020. 

In terms of other asset classes; US bond yields have surged across the curve in anticipation that strong wage growth and better than expected labour market outcomes will encourage the Fed to tighten monetary policy more aggressively this year. The US 2-year jumped 7bps on the data to fresh post-pandemic highs around 1.28%, the 5-year lept roughly 8bps on the data to also hit fresh post-pandemic highs around 1.75% and is now eyeing late 2019 highs just under 1.80%. The 10-year also jumped about 8bps on the data and is now flirting with the 1.90% level and last month's post-pandemic highs. The 30-year saw a slightly less convincing bounce of about 6bps, meaning the 5s 30s spread fell to fresh post-pandemic lows near 20bps.

US stocks, meanwhile, took a hit in pre-market trade as the hot labour market data pumped Fed tightening fears. S&P 500 futures dipped towards 4450 from around 4480 prior to the data and now trade more than 1.5% lower on the day. The post-strong Amazon earnings upside seen during Asia Pacific trade now seems firmly in the rear-view mirror.