All eyes are on the upcoming US January nonfarm payrolls report, scheduled for release this Wednesday evening, Beijing time. According to a recent research report from Goldman Sachs, the firm anticipates that nonfarm payrolls increased by just 45,000 in January. This projection falls below the market's consensus expectation of 70,000 and is also lower than the average growth rate of just over 50,000 seen in the previous two months. The unemployment rate is expected to hold steady at 4.4%, while average hourly earnings are forecast to rise 0.35% month-over-month.

Goldman Sachs highlights several factors that could weigh on the official employment figures. A key uncertainty involves the US Bureau of Labor Statistics' "birth-death" model, which is due for an update in the January report. The firm estimates that this adjustment could reduce the overall nonfarm payroll growth by 30,000 to 50,000 jobs. Furthermore, a range of alternative or "big data" employment indicators tracked by Goldman Sachs continue to show weak hiring momentum, with an average increase of around 40,000 for the month.

Government hiring is also anticipated to provide little significant support, with public sector employment expected to remain largely unchanged. Concurrently, indicators of labor demand have softened. Although some alternative measures suggested job openings remained robust at the end of last year, The Conference Board's Labor Differential Index fell sharply in January to its lowest level since early 2021, indicating a weakening in the subjective perception of job availability.

However, Goldman Sachs also points to several countervailing factors that may limit the downside risks. Measures of layoffs have improved, with initial jobless claims declining in January and surveys showing a reduction in the number of firms reporting layoffs. Seasonal factors—which typically anticipate larger job losses at the start of the year—are also adjusted over time, thereby reducing the magnitude of the seasonal drag.

The firm also expects a rebound in retail and construction employment, following weaker-than-usual holiday hiring and weather-related disruptions in December. Additionally, the resolution of labor strikes is anticipated to provide a small boost to January's nonfarm payrolls.

Overall, Goldman Sachs believes the evidence points to moderate but slowing job growth, reinforcing the narrative of a "gradual cooling" in the US labor market rather than a "sudden deterioration." If the nonfarm payroll data released tonight aligns with Goldman's expectations, it could strengthen market expectations for a gradual labor market cooldown. This, in turn, might alleviate upward pressure on yields and support a more patient policy stance from the Federal Reserve.