Weaker revisions still leave markets expecting the Fed to stay cautious on cuts
January’s delayed US jobs report hands the Federal Reserve a mixed message, but one that still sparks caution rather than a quick rate cut.
The Bureau of Labor Statistics (BLS) reported that nonfarm payrolls rose by 130,000 and the jobless rate slipped to 4.3%, even as annual revisions showed 2025 was the weakest year for job creation since the pandemic.
Health care, social assistance and construction led the gains as parts of the public sector and finance pulled back. Wage growth ran at 0.4% for the month and 3.7% year‑over‑year.
There were 7.5 million unemployed workers and 6.5 million job openings in December, while Challenger, Gray & Christmas tracked 108,435 announced layoffs in January, the highest for a January since 2009.
Those cross‑currents landed just weeks before the Fed’s March 18 meeting. Futures pricing and Fed‑watch surveys continue to imply that policymakers are more likely to hold than cut, after already trimming rates three times late last year.
The CME FedWatch gauge showed the chance of a March rate cut sliding from 20.1% on Tuesday to 5.9% after the data hit, tilting expectations toward the Fed holding steady until later in 2026.
United States employers announced 108,435 job cuts in January, the worst start to a year since 2009, fueling debate over whether the Federal Reserve will move toward rate cuts as labor market risks intensify.https://t.co/4VKhY2dkaC
— Mortgage Professional America Magazine (@MPAMagazineUS) February 6, 2026
Fed stays cautious as data sent mixed signals
Chair Jerome Powell said in his late‑January press conference that while job gains remained low, the unemployment rate showed “some signs of stabilization” and that softer labor demand made it “a difficult time” to read the market. Those remarks, coupled with the January print, left futures traders leaning toward the Fed holding rates in March and eyeing potential easing later in 2026 rather than an imminent pivot.
“The January jobs report shows modest improvement relative to prior months. However, the job gains continue to be focused in just a few sectors, matching the uneven pace of economic growth we are seeing in many data releases. Overall, this report provides support for FOMC officials who have voted to keep rates steady for the time being,” MBA senior vice president and chief economist Mike Fratantoni said.
Governor Christopher Waller said benchmark revisions are likely to show there is “virtually no growth” in payroll employment last year.
“Zero. Zip. Nada. Let this sink in for a moment—zero job growth versus an average of almost 2 million for the 10 years prior to 2025. This does not remotely look like a healthy labor market,” Waller said, warning that planned 2026 layoffs risk “substantial deterioration” ahead.
From the White House side, National Economic Council director Kevin Hassett urged markets not to overreact to smaller payroll gains. People should expect “slightly smaller jobs numbers,” he told CNBC on Feb. 9, arguing they may reflect a “productivity boom” and “a pretty big decline in the labor force.”
“One shouldn’t panic if you see a sequence of numbers that are lower than you’re used to because, again, population growth is going down, and productivity growth is skyrocketing,” Hassett said. “It’s an unusual set of circumstances.”
What it means for mortgage demand
“From a housing market perspective, a stronger job market should improve consumer confidence and support demand this spring,” Fratantoni said.
His view echoes other economists who argued that January’s data point to a “largely frozen job market” that has begun to stabilise rather than a sharp downturn, even as corporate layoff plans and a drop in job openings flashed caution.
For mortgage professionals, a slightly firmer labour backdrop, combined with evidence of a cooler 2025 than previously believed, keeps the Fed on a narrow path: cuts remain possible later this year, but January’s upside surprise reduces the urgency.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
