Evelyn Reynolds

When the Bureau of Labor Statistics releases its nonfarm payrolls count for January, it is projected to show growth of 169,000, down from 256,000 in December, but nearly in line with the three-month average.
Also, annual benchmark revisions are projected to show a record increase of 3.5 million in the population and 2.3 million in household employment.
Recent indicators show that while hiring has leveled off, layoffs aren’t increasing and workers aren’t quitting, though job openings are on the decline.

A hiring sign is posted on the door of a Taco Bell in Alexandria, Virginia, on Aug. 22, 2024.
Anna Rose Layden | Getty Images

The U.S. labor market likely began 2025 in solid fashion, in a bit of a step down from where it closed the previous year.
When the Bureau of Labor Statistics releases its nonfarm payrolls count for January, it is projected to show growth of 169,000, down from 256,000 in December, but nearly in line with the past three-month average. The unemployment rate is projected to stay at 4.1%, according to the Dow Jones consensus for the report, which will be out Friday at 8:30 a.m. ET.

While the takeaway could be that job creation is slowing, the broader view is that the employment picture is holding solid, and it’s not likely to be a problem for the Federal Reserve any time in the near future.
“With inflation at least for now at tolerable levels and firms very comfortable making sustained investment, there’s no reason why we shouldn’t continue to see job growth around 150,000 per month, which is the upper end of what’s needed to keep the labor market stable,” said Joseph Brusuelas, chief economist at RSM. “In other words, we’re at full employment. This is a good problem to have.”
By the time the Fed concluded its final three meetings of 2024, it had cut its key borrowing rate by a full percentage point. In good part, this was because policymakers sought to support a labor market that showed signs of weakening.
However, recent indicators show that while hiring has leveled off, layoffs aren’t increasing and workers aren’t quitting, though job openings are on the decline.
Such relative stability is a welcome sign with the likelihood that the Fed will be on hold, possibly until summer, while officials wait to see the fallout of President Donald Trump’s fiscal agenda that includes aggressive tariffs against the largest U.S. trading partners.

“The economy is still going to roll on, people are going to make investment decisions, they’re going to get up each morning and go to work,” Brusuelas said.

Annual revisions to take focus

Though the usual payroll number is expected to show more or less status quo conditions, markets also will be watching annual benchmark revisions to both the establishment and household surveys that the BLS compiles.
When the initial revisions were released in August 2024, they showed a stunning 818,000 fewer jobs created than previously reported in the establishment count from April 2023 to March 2024. That total is expected to come down considerably as adjustments are made for immigration and population.
The revisions also are projected to show a record increase of 3.5 million in the population and 2.3 million in household employment, according to Goldman Sachs. The firm sees more modest adjustments upward in labor force participation and unemployment.
The two BLS surveys have differed sharply in the post-Covid years. The establishment survey is used to calculate the nonfarm payrolls number while the BLS derives the unemployment rate from the household count. The latter has shown a less optimistic view of employment conditions that could be corrected with the revisions.
In any event, if the report comes in anywhere near expectations, it’s unlikely to move the needle for the Fed even with the tariff question lingering.
“The labor market is a lot more important to the Fed than what’s going on with tariffs,” said Eric Winograd, director of developed market economic research at AllianceBernstein. “The payrolls numbers are volatile. Anything can happen in any given month. But there’s nothing in particular that makes me think that this month’s print will look meaningfully different than the past few, and that’s enough to keep the Fed on hold.”
In addition to the headline payroll numbers and revisions, the BLS will also release data on average hourly earnings.
The estimate is for January to show a 0.3% increase in wages and a 3.7% 12-month increase. If the annual figure is correct, it will be the lowest level since July 2024.

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Even if the U.K. is not the “direct recipient” of potential tariffs imposed by the U.S., “it will have an effect,” Bank of England Governor Andrew Bailey said Thursday.
The Bank of England on Thursday cut its benchmark interest rates by 25 basis points to to 4.5%.

Even if the U.K. is not the “direct recipient” of potential tariffs imposed by the U.S., “it will have an effect,” Bank of England Governor Andrew Bailey said Thursday.
If tariffs are announced, their effect on the global economic growth and inflation would need to be looked at, Bailey told CNBC’s Steve Sedgwick.

“Now I think that in terms of growth in the world economy, if this will lead to a, you know, fragmentation of the world economy, that is not good for growth,” Bailey said. “The impact on inflation is more ambiguous, because it depends upon what other countries do in response, it depends on what the consequences of those actions and reactions are for trade,” he added.
U.S. President Donald Trump has warned that the U.K. could be in line for tariffs, but has also indicated a deal could potentially be struck. Trump last week announced tariffs on goods imported from China, Canada and Mexico, before pausing planned duties on imports from the two latter economies.
Bailey on Thursday also noted that the U.K. “does not have a substantial trade imbalance with the U.S.”
The U.S. was the U.K.’s biggest trading partner in the year to September 2024, accounting for over 17% of total U.K. trade, according to official data.
Depending on which figures you look at, the two countries either have a small trade deficit or surplus. What’s important for Trump, though — who has expressed dissatisfaction when the U.S. exports less to a country than it imports — is the numbers are almost balanced.

Bailey also pointed out that services are a large part of U.K. trade, which classic tariffs do not affect in the same way as other goods.

A ‘gradual’ and ‘careful’ BOE decision

The Bank of England on Thursday cut its benchmark interest rate by 25 basis points to to 4.5%. Seven members out of the nine-strong monetary policy committee (MPC) voted in favor of the cut, while two members voted for a larger 50 basis-point reduction.
After the announcement, Bailey said in a press conference that the MPC expected to be able to cut interest rates further as disinflation progressed, but noted that these decisions would be taken on a meeting-by-meeting basis.
Speaking to CNBC, Bailey described the cut as “careful” and “gradual,” adding that the central bankers were using those words “very deliberately.”
The word “gradual” referred to the disinflation process, while “careful” was a nod toward “risks and uncertainties,” he said.
Such uncertainties, “could lead to us having, frankly, you know, higher inflation, which we will have to deal with. We’re going to have this sort of uptick in inflation.” He added that this inflation is unlikely to persist.
The BOE on Thursday also halved its growth expectation for the U.K. for 2025, from 1.5% to 0.75%.
The economy flatlined in the third quarter, according to data released in December, while the latest monthly GDP reading showed the economy expanded just 0.1% in November, after shrinking by 0.1% in October. 
— CNBC’s Chloe Taylor and Holly Ellyatt contributed to this report. More

The Trump administration is more focused on keeping Treasury yields low rather than on what the Fed does, Treasury Secretary Scott Bessent said.
Bessent indicated that Trump will not be hectoring the Fed to cut, as he did during his first term.

U.S. Secretary of the Treasury Scott Bessent speaks, at the White House, in Washington, U.S. February 3, 2025. 
Elizabeth Frantz | Reuters

The Trump administration is more focused on keeping Treasury yields low rather than on what the Federal Reserve does, Treasury Secretary Scott Bessent said.
While in the past President Donald Trump has implored the Fed to cut its benchmark rate, Bessent said Wednesday that the current strategy is using the levers of fiscal policy to keep rates low. The benchmark the administration is using will be the 10-year Treasury, not the federal funds rate that the central bank controls, he added.

“The president wants lower rates,” Bessent said in an interview with Fox Business host Larry Kudlow, who served as director of the National Economic Council during Trump’s first term. “He and I are focused on the 10-year Treasury and what is the yield of that.”
Beginning in September 2024, the Fed engaged in a rate-cutting cycle that took a full percentage point off the funds rate. The benchmark sets what banks charge each other for short-term lending but historically has influenced a host of other rates for things like car loans, mortgages and credit cards.
However, Treasury yields actually jumped following the Fed reductions, as did market-based indicators of inflation expectations. Since Trump has taken office, though, the 10-year Treasury has been moving mostly lower and dropped about 10 basis points, or 0.1 percentage point, in Wednesday trading.

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10-year yield

Bessent indicated that Trump will not be hectoring the Fed to cut, as he did during his first term.
“He wants lower rates. He is not calling for the Fed to lower rates,” Bessent said. Trump believes that “if we deregulate the economy, if we get this tax bill done, if we get energy down, then rates will take care of themselves and the dollar will take care of itself.”

One priority of the administration is to get the Tax Cuts and Jobs Act made permanent, while it also will focus on energy exploration and deficit reduction.
“We cut the spending, we cut the size of government, we get more efficiency in government, and we’re going to go into a good interest rate cycle,” Bessent said.
The Treasury secretary’s statement on targeting bond yields “is consistent with our view that he has essentially one job – to try to prevent the 10y yield from breaking 5 percent at which point we think Trumponomics breaks down, with equities rolling over and housing and other rate sensitive sectors breaking lower,” wrote Krishna Guha, head of global policy and central bank strategy at Evercore ISI.
The 10-year last traded at 4.45%, down from its mid-January peak of 4.8%.
Shortly after taking office, Trump said he would demand lower interest rates. However, a few days ago, the president said he agreed with the Fed’s Jan. 29 decision to keep the funds rate steady, which Guha said “eases tension” between the two sides and could be positive for markets.

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In recent days, multiple central bank policymakers not only have noted the uncertainty surrounding tariffs, they also have highlighted the potential impact on inflation.
Chicago Fed President Austan Goolsbee cited a number of supply chain threats that include “large tariffs and the potential for an escalating trade war.”
Economists generally see tariffs as having one-time impacts on prices. However, in this case President Donald Trump is casting a wide enough net that it could generate the kind of underlying inflation the Fed fears.

Austan Goolsbee speaking at Jackson Hole on August 23, 2024.
David A. Grogan | CNBC

Federal Reserve officials take great pains not to comment on fiscal policy, but the looming threat from tariffs is forcing their hand.
In recent days, multiple central bank policymakers not only have noted the uncertainty surrounding President Donald Trump’s desire to slap broad-ranging duties on products from Canada, Mexico and China — and perhaps the European Union — they also have highlighted the potential impact on inflation.

Any indication that the tariffs are presenting longer-lasting pressure in prices could make the Fed hold interest rates higher for longer.
In remarks at an auto symposium Wednesday in Detroit, Chicago Fed President Austan Goolsbee cited a number of supply chain threats that include “large tariffs and the potential for an escalating trade war.”
“If we see inflation rising or progress stalling in 2025, the Fed will be in the difficult position of trying to figure out if the inflation is coming from overheating or if it’s coming from tariffs,” Goolsbee said. “That distinction will be critical for deciding when or even if the Fed should act.”
On Jan. 29, the Federal Open Market Committee, of which Goolsbee is a voting member, voted to hold its benchmark interest rate steady at a range of 4.25% to 4.50% as it evaluates the evolving set of economic conditions.
The vote came amid a backdrop of gamesmanship between Trump and its largest U.S. trading partners, in which he postponed levies against Canada and Mexico but added 10% in tariffs against China, which retaliated with its own measures.

Economists generally see tariffs as having one-time impacts on prices, affecting particular goods where the duties are targeted but not acting as more widespread and more fundamental drivers of inflation. However, in this case Trump is casting a wide enough net that it could generate the kind of underlying inflation the Fed fears.
A limited road map
In an interview Monday with CNBC, Boston Fed President Susan Collins, also an FOMC voter, said she and her staff are studying the potential impact of tariffs, and she noted the unusual nature of the sweeping tariffs Trump has proposed.
“We have limited experience of such large and very broad-based tariffs,” she said. “There are many different dimensions, and there are second-round effects as well, which make it particularly hard to really assess what the amounts would be … We don’t know what the time frame would be that would cause a rise in a price level.”
If the tariffs were short-lived, “you’d expect the Federal Reserve would try to look through,” she said. “But of course, there are many factors going on from that perspective. So I’ll just say quickly that the underlying trends in inflation in the economy really matter a lot for how, you know, how I think about policy going forward.”
Other Fed officials, such as Philadelphia President Patrick Harker and the Atlanta Fed’s Raphael Bostic, also said they are concerned about potential inflationary effects and said they also will be watching for longer-term impacts.
For his part, Chair Jerome Powell deflected multiple questions about tariffs at his post-meeting news conference last week, saying it’s too early to make judgments about fiscal policy.
“We don’t know what will happen with tariffs, with immigration, with fiscal policy, and with regulatory policy,” he said. “I think we need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be.”
— Reuters contributed to this report. More

ADP said companies created a net 183,000 jobs on the month, slightly more than the 176,000 in December.
Pay for workers who stayed in their jobs grew at a 4.7% annual rate, or 0.1 percentage point more than in December.
All of the job creation came from service providers, who added 190,000 positions while goods producers lost 6,000.

Maplewood, Minnesota. Metro Transit hiring drivers with the possibility to make $30.00 an hour. (Photo by: Michael Siluk/UCG/Universal Images Group via Getty Images)
Ucg | Universal Images Group | Getty Images

Private sector companies added more jobs than expected in January, furthering the case for a stable labor market that allows the Federal Reserve time as it contemplates its next policy move, ADP reported Wednesday.
The payrolls processing firm said companies created a net 183,000 jobs on the month, slightly more than the 176,000 in December, a number that was revised sharply upward from the initial figure of 122,000. Economists surveyed by Dow Jones had been looking for a gain of 150,000.

Pay for workers who stayed in their jobs grew at a 4.7% annual rate, or 0.1 percentage point more than in December.
Though the headline ADP number topped expectations, the internals showed an unbalanced picture.
All of the job creation came from service providers, who added 190,000 positions while goods producers lost 6,000. (The numbers don’t add up to the 183,000 due to rounding.)
“We had a strong start to 2025 but it masked a dichotomy in the labor market,” APD chief economist Nela Richardson said. “Consumer-facing industries drove hiring, while job growth was weaker in business services and production.”
Trade, transportation and utilities topped sectors with 56,000 new jobs, with leisure and hospitality close behind at 54,000 and education and health services adding 20,000. However, manufacturing lost 13,000 positions.

Job creation was spread fairly evenly across business size, with companies that employ workers leading with 92,000.
Fed officials are watching the jobs picture closely as they consider whether to continue lowering interest rates. The Fed last year cut 1 percentage point off its key borrowing rate in an effort to support a labor market that had showed signs of slowing. Recently, policymakers have stressed the importance of staying patient as they watch the tariff battle in Washington as well as the impact from the rate reductions.
The ADP report serves as a run-up to the more closely watched nonfarm payrolls report, due Friday from the Bureau of Labor Statistics, which unlike ADP includes government workers. The consensus view for the BLS report is a gain of 169,000 in payrolls in January, with the unemployment rate holding at 4.1%.
The two reports sometimes differ significantly. However, ADP said it continues to expand its sample size for the pay measure portion, which is now at 14.8 million compared to nearly 10 million when it launched. More