US Adds 467,000 Jobs In January: 'Good For The Economy, But Not For Markets'

The SPDR S&P 500 ETF Trust SPY traded lower by 0.2% Friday morning after the Labor Department reported encouraging U.S. jobs market numbers from January.

The U.S. added 467,000 jobs in January, beating consensus economist estimates of 150,000 jobs. The U.S. unemployment rate ticked higher to 4% from 3.9%. The labor participation rate was unchanged at 62.2%, slightly below its 63.4% pre-pandemic rate in February 2020.

Wage growth was 5.7%, up from 4.7% in December.

The Labor Department also revised November’s total job growth higher from 249,000 to 647,000 and December’s job growth higher from 199,000 to 510,000. The combined revisions totaled 709,000 additional jobs.

The leisure and hospitality industry led the job creation in January, adding 151,000 positions. Unfortunately, employment in the leisure and hospitality industry is still down by 1.8 million jobs since February 2020.

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Economy Overcomes Omicron: Julian Koski, chief investment officer at New Age Alpha, said the jobs report is a reassuring sign of the strength of the U.S. economy, even amid the surge in the omicron variant of COVID-19.

"The recent market volatility suggests that investors are too focused on predicting Federal Reserve policy, when the more important consideration is assessing how individual companies may respond to rising interest rates, which requires careful analysis," Koski said.

Barry Gilbert, Asset Allocation Strategist at LPL Financial, said the jobs report is all about the Fed for investors.

"Today’s upside surprises in both job creation and wage growth keep the Fed on track to begin raising rates in March and hike four or more times this year," Gilbert said.

Cliff Hodge, Chief Investment Officer for Cornerstone Wealth, said the negative stock market reaction to the report tells investors all they need to know.

"The report is unequivocally good for the economy, but not for markets as the strength in the numbers presents another data point which supports more aggressively hawkish Fed action," Hodge said.

0.5% Rate Hike Coming? Brian Price, Head of Investment Management for Commonwealth Financial Network, said the strong jobs report increases the likelihood the Federal Reserve will implement a 0.5% interest rate hike in March.

"I still believe that 25 basis points is the base case at this point but 50 is not off the table either," Price said.

John Lynch, Chief Investment Officer for Comerica Wealth Management, said investors should prepare for a potential 0.5% rate hike in March.

"We look for renewed pressure on long-duration growth trade and view strong employment as consistent with global cyclical recovery and supportive of value, profitable small caps and cyclical sectors," Lynch said.

Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, said the state of the U.S. economy is encouraging, but stocks and bonds could see further downside in the near term.

"The strong jobs report is good news for the economy and American workers, unfortunately for the stock market it should add to concerns that the Federal Reserve is going to be forced to raise rates more quickly and to a higher level, as wage growth jumped up to 0.7% on a month-over-month basis," Zaccarelli said.