Jobs Data Crushes Estimates, Markets Rethink Fed Predictions

Friday’s jobs data showed the economy added far more jobs than analysts expected, putting the unemployment rate at its lowest in more than 50 years.

It sent markets into a frenzy trying to decipher what this means for interest rates. 

Markets slipped on the news initially before recovering later in the trading session. The S&P 500 and Nasdaq Composite indexes each lost around 1% before paring losses to around 0.3% each as of 10:30 am in New York. Cryptos also bounced back to the green, with bitcoin (BTC) and ether (ETH) trading about 0.6% and 1.4% higher, respectively. 

The Federal Reserve opted to increase interest rates a quarter of a percentage point Wednesday, noting that “peak employment” was still a top priority for the central bank. The market remains tight though, with the number of posted jobs per unemployed worker rising yet again in December, according to data from the Bureau of Labor Statistics. 

“The past year the biggest risk to markets heading into each jobs report was that it would print ‘Too Hot’ and cause the Fed to hike rates even more than before and get more hawkish in its language,” Tom Essaye, founder of Sevens Report Research, wrote in a note ahead of Friday’s labor data release. 

Markets were still pricing in an almost certain likelihood that the Fed would go for another 25 basis point interest rate increase in March, according to CME Group data. 

“But given Powell did not push back on the market’s expectations for just one more rate hike and two-to-three rate cuts in late 2023, it implies that the labor market is not as big a hawkish risk as it seemed because there’s been little progress on restoring balance in the labor market (the balance the Fed stated it desired),” Essaye added. 

Coming off of an exceptional month for asset performance across the board, analysts are speculating how long cryptos can sustain their run. Bitcoin still has not managed to break the $24,000 level while ether continues to flirt around $1,600. 

“January was a robust month for crypto and the FOMC decision helped keep all risky assets going higher,” Edward Moya, senior market analyst at Oanda, said.

“Bitcoin is rallying as the post-Fed rally holds and global bond yields extend their declines. Bitcoin is riding this risk-on mood from Wall Street, but it might struggle to break above massive resistance from the $25,000 level.” 

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