Fed set to defy Trump again, say advisors

The delayed January jobs market points to strong growth, but the market - and advisors – indicate that rate cuts are in jeopardy.

Expectations were for a much weaker labor picture. Total nonfarm payroll employment rose by 130,000 in January, according to the Bureau of Labor Statistics, coming in well above expectations. The unemployment rate ticked down slightly to 4.3 percent, from 4.4 percent in the prior month. There were job gains in healthcare, social assistance, and construction, the Bureau reported, while federal government and financial activities lost jobs. 

The report comes at a time when stocks, particularly in sectors such as tech and healthcare, have experienced recent selloffs.

“The market got the jobs report it needed,” said Brad Smith, portfolio manager at Janus Henderson Investors, in a statement. “The BLS January jobs report showed a more robust labor market than many feared with 130k increase in Nonfarm Payrolls vs 65k job additions expected, the largest increase in more than a year.”

Wednesday’s numbers provide a solid datapoint on the side of robust economic growth, according to Smith, who notes that an improving labor market and wage growth can support consumer spending. “The Fed will take this point in to its calculus when it makes its decision next month on whether to hold rates steady,” he added. “With its wait-and-see data dependent stance, this will surely put the balance towards a hold.”

Last month the Federal Reserve kept its policy rate steady at 3.5 percent to 3.75 percent, despite coming under intense pressure from President Donald Trump to lower interest rates. 

Markets initially responded positively to the job report numbers. The S&P 500 Index (Ticker: SPX) rose in early trading, before slipping 0.3 percent. The Dow Jones Industrial Average (Ticker: DJI) and Nasdaq Composite (Ticker: IXIC) also rose, before falling 0.4 percent and 0.3 percent, respectively.

“Wednesday's delayed jobs report for January was much better-than-expected, which suggests that the labor market is recovering from its hiccups over the past six months,” said Robert Edwards, chief investment officer at Naples, Florida-based Edwards Asset Management, in a statement. The economy is still churning out jobs, according to Edwards, who says there is little reason to be concerned about the labor market.

“Markets are strong out of the gate in 2026,” he added. “The fact that the first five trading sessions of 2026 were positive and that the month of January was positive suggests historically that the full year 2026 should be another positive year.”

However, Edwards thinks that Wednesday’s labor report is unlikely to change anything for the Federal Reserve, which is likely on pause when it comes to any further rate cuts until there is a new Fed chair.

President Trump has chosen Kevin Warsh, the former Federal Reserve governor, to succeed Jerome Powell as Fed chair.

The January jobs report showed a rebounding labor market that has regained its footing after last year's second half weakness, according to Jeff Schulze, head of economic and market strategy at ClearBridge Investments. “The data was strong across the board, with a further drop in the unemployment rate to 4.3 percent and the largest gain in private sector job creation since the end of 2024,” he said, in a statement.

“This report bodes well for the health of the U.S. consumer, with a pickup in wage growth and labor force participation,” Schulze added. “Aggregate weekly payrolls - a good proxy for economy-wide aggregate income gains that is closely linked to consumption - has risen by nearly 5 percent over the past year.”

However, the Bureau of Labor Statistics did revise the 2025 number for total nonfarm employment to an increase of 584,000 to an increase of 181,000 on a seasonally adjusted basis.

Gina Bolvin, president of Bolvin Wealth Management Group said that, while January’s jobs report was better than expected, it doesn’t change the bigger picture. “The addition of 130,000 jobs shows the labor market is stabilizing, yet the downward revisions to 2025 confirm growth slowed meaningfully last year,” she said, in a statement. “With unemployment still elevated, the Fed has room to stay patient and keep rate cuts on the table.”

The jobs report had been delayed from its initial release date of Feb. 6 as a result of the government shutdown.