US labour market strength (unemployment 3.4%) hinders Fed’s roadmap

US jobs

Bankinter: Non-agricultural job creation (January) reaches 517K vs 188K estimated and 223K previous. The unemployment rate stands at 3.4% vs. 3.6% estimated and 3.5% previous. Wages increase +4.4% vs. +4.6% previously (+4.3% estimated).


The data reflect the strength of the labour market, but may hinder the Fed’s roadmap. The future evolution of interest rates depends, to a large extent, on the evolution of inflationary pressures, including those coming from the labour market.

Employment is improving despite the tightening of financial conditions that started in March 2022 and an uncertain economic growth environment. Indeed, labour supply (JOLTs) outstrips demand, allowing wages to rise (vacancy/stop ratio 1.9x in December vs 1.2x pre-pandemic). During the press conference of the recent Fed meeting, Powell stated that it is difficult to reach the 2% inflation target without a better balance in the labour market, which, as these data show, remains tight.

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