U.S. payrolls rose by 130,000 in January, more than expected; unemployment rate at 4.3%

Key Concepts

• Non-Farm Payrolls: The number of jobs added to the economy excluding farm employment.
• Average Hourly Earnings: The average change in earnings for all employees.
• Unemployment Rate: The percentage of the labor force that is unemployed and actively seeking work.
• Labor Force Participation Rate: The percentage of the civilian noninstitutional population that is in the labor force.
• U6 (Underemployment Rate): A broader measure of unemployment that includes marginally attached workers and those employed part-time for economic reasons.
• Benchmark Revisions: Adjustments made to previously released data based on more complete information.
• Yields (Treasury Yields): The return an investor receives on a debt security.
• Seasonal Adjustments: Statistical methods used to remove the effects of seasonal variations in data.

January Jobs Report Analysis – Rick Santelli Breakdown

The January jobs report, released on “Jobs Wednesday,” presents a robust labor market picture, prompting a significant reaction in Treasury yields. Rick Santelli details the key figures and their implications.

Headline Numbers & Revisions: Non-farm payrolls for January came in at 130,000, exceeding expectations of around 110,000-120,000. This represents the strongest reading since April of last year (158,000). However, revisions for the previous two months totaled a downward adjustment of -17,000 jobs.

Earnings & Hours Worked: Average hourly earnings increased by 0.4% month-over-month, matching expectations and representing the highest increase since the summer of 2024. Year-over-year, earnings rose 3.7%, in line with expectations, but slightly down from 3.8% previously. Hours worked also increased, rising to 34.3 hours per week, a level not seen since November, and up from March 2024.

Unemployment & Labor Force Participation: The unemployment rate fell to 3.9% (down one tenth of a percent), reaching levels last observed in August of last year. To find a lower rate, one must go back to June of last year. The labor force participation rate also improved, reaching 62.5%, the highest since April of last year (62.6%).

Underemployment Rate (U6): The U6 underemployment rate decreased to 8.0%, the lowest level since July of last year (7.9%). This indicates a broader improvement in labor market conditions beyond just headline unemployment.

Benchmark Revisions: Benchmark revisions for April 2024 to March 2025 were released, showing a downward revision of -862,000 jobs. While less severe than initially anticipated (estimates ranged around -900,000, with some predicting -700,000), the revision still represents a significant downward adjustment.

Market Reaction (Yields): The strong data triggered a sharp increase in Treasury yields. The 10-year Treasury yield rose from 4.12% to 4.19%, while the 2-year Treasury yield experienced a more substantial jump, moving from 4.45% to 4.53%. Santelli attributes this movement to the “solid, solid data points.”

Santelli’s Perspective on Seasonal Adjustments: Santelli expresses skepticism regarding the accuracy of seasonal adjustments, suggesting they may be distorting the true economic picture. He cites the recent retail sales data, which appeared flat initially but may have been misrepresented due to seasonal adjustment methodologies. He implies that the underlying strength of the economy may be underestimated due to these adjustments. He states, “I think seasonal adjustments are dead on arrival on most numbers.”

Logical Connections: The report’s positive elements – strong payroll growth, rising earnings, falling unemployment, and increased labor force participation – collectively paint a picture of a resilient labor market. This strength directly influenced the market’s reaction, driving up Treasury yields as investors anticipate continued economic activity and potentially reduced expectations for near-term interest rate cuts. The benchmark revisions, while negative, were less severe than feared, mitigating some of the downward pressure. Santelli’s commentary on seasonal adjustments introduces a critical perspective, questioning the reliability of commonly used economic indicators.

Data & Statistics:

• Non-Farm Payrolls (Jan): 130,000 (Exceeded expectations)
• Payroll Revisions (Past 2 Months): -17,000
• Average Hourly Earnings (MoM): +0.4% (Highest since Summer 2024)
• Average Hourly Earnings (YoY): +3.7%
• Unemployment Rate: 3.9% (Down from 4.0%)
• Labor Force Participation Rate: 62.5%
• U6 Underemployment Rate: 8.0%
• Benchmark Revisions: -862,000
• 10-Year Treasury Yield: Increased from 4.12% to 4.19%
• 2-Year Treasury Yield: Increased from 4.45% to 4.53%

Conclusion: The January jobs report indicates a surprisingly strong labor market, defying expectations of a slowdown. The data supports the narrative of a resilient economy, prompting a reassessment of monetary policy expectations and driving up Treasury yields. Santelli’s cautionary note regarding seasonal adjustments highlights the importance of critically evaluating economic data and considering potential biases in commonly used methodologies.