U.S. January Nonfarm Payrolls Post Strongest Gain Since April of Last Year

Market Overview

The January U.S. nonfarm payrolls report came in broadly stronger than expected, prompting markets to scale back rate cut expectations. Traders pushed back the anticipated timing of the first Federal Reserve rate cut from June to July, triggering a selloff in U.S. Treasuries.

Treasury yields moved higher across the curve. The 2-year yield climbed 6.4 basis points, while the 10-year yield rose approximately 3 basis points. The U.S. dollar experienced notable intraday volatility before closing marginally higher by 0.08%. The Japanese yen extended its rally for a third consecutive session, at one point appreciating more than 1% intraday.

Cryptocurrencies weakened. Bitcoin fell 1.2%, while Ethereum declined more than 2%. Spot gold advanced 1.3% amid choppy trading, and silver surged before paring gains but still closed up more than 4%. WTI crude oil rose 1% following reports that former President Donald Trump is privately considering withdrawing from the United States-Mexico-Canada Agreement (USMCA).

January nonfarm payrolls increased by 130,000, marking the largest monthly gain since April of last year. The unemployment rate declined to 4.3%. Annual benchmark revisions showed a downward adjustment of 862,000 jobs. Wall Street economists now expect the first rate cut to be delayed until July, while the so-called “Fed whisperer” suggests the pause in easing could last even longer.

In fiscal developments, the U.S. budget deficit for the first four months of fiscal year 2026 narrowed by 17%, driven in part by a sharp increase in tariff revenues. However, the Congressional Budget Office warned that Trumps fiscal trajectory is unsustainable, projecting that deficits over the next decade will increase by an additional $1.4 trillion.

Oil prices rose more than 2% intraday following reports of potential U.S. withdrawal from USMCA. Meanwhile, Trump faces new political challenges after Republican leadership failed to prevent a House vote on overturning tariffs imposed on Canada.

January Nonfarm Payrolls Surprise to the Upside

U.S. January nonfarm payrolls increased by 130,000, marking the largest gain since April 2025. The unemployment rate unexpectedly declined to 4.3%, while average hourly earnings rose 0.4% month-over-month, both exceeding expectations.

The Bureau of Labor Statistics revised down total nonfarm employment by 898,000 for the year ending March 2025. Healthcare led job gains, manufacturing returned to expansion territory, and temporary help services continued to contract.

Markets responded by pushing rate cut expectations from June to July. The Federal Reserve now faces a conflicting picture: robust current monthly data offset by substantial downward historical revisions.

Key Data to Watch (GMT+8)

21:30 ET — U.S. January Producer Price Index (PPI)

23:00 ET — U.S. January Existing Home Sales (Annualized MoM)