Awaiting U.S. Labor Market Figures for January
February 7, 2025
The dollar is standing firm ahead of this morning’s release by the Labor Dept of last month’s jobless rate, growth in employment, and wage inflation. The greenback rose overnight by 0.3% against the yen and Swissy, 0.2% versus the euro and loonie, and 0.1% relative to the Australian and New Zealand currencies. Sterling is unchanged. Investors got reassurance yesterday from the Trump administration’s Treasury Secretary Bessert that the strong dollar policy of the Biden and prior presidencies will continue going forward. That was not a given, as President Trump has repudiated many orthodoxies in other areas and has singled out the U.S. trade deficit for special policy attention. In 1977, former President Carter’s administration entered office at a time of a large trade gap and proceeded to rhetorically steer the the dollar lower. That proved to be a mistake, as reinforcing dollar depreciation and accelerating domestic price inflation ensued.
U.S. stock futures are steady ahead of the Labor Department data release, which will also include annual benchmark revisions to employment. European stock markets also have barely moved, but Asia overnight, stock markets closed up 1.2% in Hong Kong and 1.0% in China while falling by 1.9% in Indonesia, 0.7% in Japan and 0.6% in South Korea.
The 10-year U.S. Treasury yield of 4.44% is unchanged. Euroland’s comparable sovereign debt yields are also marking time, while those in the U.K. and Japan have respectively dropped 3 basis points and climbed that same amount.
Prices for Bitcoin, oil and gold are 1.4%, 0.7% and 0.4% higher just ahead of the data.
There are two more central bank interest rate changes to report. The Bank of Mexico‘s overnight interbank rate was reduced 50 basis points to 9.5% in a 4-1 decision. And the Reserve Bank of India‘s Monetary Policy Committee enacted its first repo rate change since February 2023, a 25-basis point cut to 6.25%.
Inflation has declined. Supported by a favorable outlook on food and continuing transmission of past monetary policy actions, it is expected to further moderate in 2025-26, gradually aligning with the target. The MPC also noted that though growth is expected to recover from the low of Q2:2024-25, it is much below that of last year. These growth-inflation dynamics open up policy space for the MPC to support growth, while remaining focused on aligning inflation with the target.
The rate cut vote in India was unanimous, but officials also warned of a need for caution due to “excessive volatility in global financial markets and continued uncertainties about global trade policies coupled with adverse weather events.”
Non-U.S. data highlights this Friday include increases in the international reserve holdings in January totaling $9.9 billion by Japan and $7 billion in China. Japanese household spending in December advanced by a greater-than-forecast 2.3% and was associated with a 28-month high year-on-year rise of 2.7%. Japan’s leading and coincident economic indicators each rose to 2-month highs in December.
German industrial production in December was disappointing, dropping by 2.4% on month. The 12-month rates of decline were 3.1% that month, bringing the drop in year 2024 to -4.5%.
Germany’s seasonally adjusted trade surplus rose to a 4-month high of EUR 20.7 billion in December. The full-year surplus widened from EUR 219 billion in 2023 to EUR 241 billion last year.
Growth in Spanish industrial production, in contrast to Germany’s, exceeded expectations in December, with gains of 0.9% from November and 2.1% from December 2023.
Swiss consumer confidence improved to the best level since the summer of 2022 but still printed in negative territory at -29. The index hit bottom in October 2022 at -52.5.
Mexican consumer price inflation slowed to a four-year low of 3.6% last month, while CPI inflation in Chile rose to a 15-month high of 4.9%. Also during January, CPI inflation in Estonia matched December’s 3.9%, and Austrian wholesale price inflation accelerated by 0.4 percentage points to a 23-month high of 1.3%.
There was not much instant reaction to the U.S. jobs data despite some surprises in the numbers. On the whole, the labor market remains firm. Although non-farm jobs went up a little less than expected (143k) in January compared to a monthly average advance of 204k in the final quarter of 2024,
- the rise in November-December was revised upward by a combined 100k.
- average hourly earnings jumped 0.5% on month, the most in a year.
- the jobless rate slid o.1 percentage point to an 8-month low of 4.0%.
- the 12-month rate of increase in average hourly earnings (4.1%) matched December’s figure and exceeded 3.9% for a fourth straight time.
Canadian unemployment dropped to a three-month low of 6.5% last month, and jobs grew 76k, about three times more than anticipated. But on-year growth in average hourly wages continued to slow, reaching 3.7% from 3.8% in December and 3.9% in November.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Mexico, German industrial production, Reserve Bank of India, U.S. and Canadian jobs data
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