Ahead of the Nonfarm Payrolls (NFP) release, pessimistic forecasts are dominating, with some economists predicting zero or minimal job growth for January. Additionally, an annual benchmark revision is expected to erase over one million previously reported jobs.
The U.S. Bureau of Labor Statistics (BLS) will release the delayed January NFP report, which also includes annual benchmark revisions and methodology updates. The median market forecast anticipates 70,000 jobs added in January, compared to 50,000 in December. The unemployment rate is expected to hold steady at 4.4%. Average hourly earnings are projected to grow 0.3% month-over-month, while the year-over-year increase is expected to slow to 3.6% from 3.8%.
However, several Wall Street economists predict weaker figures. TD Securities and Goldman Sachs both forecast only 45,000 new jobs. Citigroup predicts 135,000, but attributes this figure to seasonal distortions, suggesting that after adjustment, job growth is closer to zero.
Mark Zandi, Chief Economist at Moody's Analytics, stated that expectations should be near zero, indicating a fragile and weakening labor market. While mass layoffs haven't materialized yet, he suggests negative job growth could appear soon.
These low expectations align with recent private-sector data showing weak employment conditions, rising layoffs, and stagnant new job postings.
The annual NFP benchmark revision poses a significant challenge. A preliminary estimate last September suggested a downward revision of 911,000 jobs through March 2025. The final figure, while potentially lower than the preliminary estimate, is still expected to be substantial. Goldman Sachs expects a revision between 750,000 and 900,000, while Fed Chair Powell recently suggested around 600,000.
Every monthly jobs report for 2025 so far has been revised downward, totaling a reduction of 624,000 jobs, bringing the average monthly gain below 40,000. Wednesday's report will also include the first revision to December's data.
Furthermore, the BLS will apply updated business birth-death model adjustments and seasonal factors for April to December 2025, potentially reducing the job count by another 500,000 to 700,000 positions. This implies that over one million jobs previously reported through December 2025 never actually existed.
Overall, the revisions in the January report will point towards a faltering labor market, likely influencing the Federal Reserve's future policy decisions.
The White House has been actively managing expectations. A weak report could pose political challenges for the administration. White House officials have argued that lower job growth reflects a "new normal," citing factors such as immigration policies and productivity gains from AI, rather than economic weakness.
Recent data already shows signs of labor market deterioration. Job openings fell to their lowest level since September 2020. January layoffs and hiring plans were reported as the worst for that month since the 2009 financial crisis. ADP reported only 22,000 private-sector jobs added in January.
However, some positive signals exist, such as improved small business employment growth according to Homebase data.
From the Federal Reserve's perspective, policymakers focus on employment trends over time rather than single-month data. Recent comments from Fed officials indicate greater concern about inflation than unemployment, with some questioning the urgency for further rate cuts. Market expectations for a March rate cut are currently low.
Analysts suggest a disappointing NFP report—with job growth below 30,000 and a rising unemployment rate—could immediately pressure the U.S. dollar. Conversely, a report meeting or exceeding expectations would reinforce expectations for the Fed to hold rates steady. Some analysts note that slowing wage growth could negatively impact consumer activity and support arguments for Fed easing.
Gold prices paused after a two-day rally, which analysts describe as a natural consolidation ahead of major data. Despite short-term volatility, fundamental supports for gold remain strong, including a weaker U.S. dollar, lower bond yields, and ongoing geopolitical tensions, which continue to provide a "safe-haven premium" for gold bulls.