US economy far outstrips expectations to add 130,000 jobs in January

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The US economy added 130,000 jobs in January, beating market expectations, in a sign of improvement in the American labour market following a string of bleak data.

Wednesday’s figure from the Bureau of Labor Statistics was almost double the 68,000 anticipated by economists polled by Bloomberg and the downwardly revised 48,000 added the previous month.

US Treasury yields jumped as investors scaled back expectations of interest rate cuts this year. The two-year yield, which is particularly sensitive to monetary policy, jumped 0.08 percentage points to 3.55 per cent, its highest level in a week.

Traders in the futures market, who had been betting on between two or three rate reductions by December of this year, slashed expectations of cuts, with just two now priced in.

Futures tracking the S&P 500 jumped 0.5 per cent higher.

The White House had appeared to be preparing for a weaker set of numbers this week. “We have to revise our expectations down significantly for what a monthly job number should look like,” Peter Navarro, Trump’s top trade adviser, told Fox Business on Tuesday.

Ian Lyngen, head of US rates strategy at BMO Capital Markets, said: “The headline payrolls number was much stronger than the market was expecting, particularly because the private data leading up to this had told a different story.”

“The divergence between the BLS data and the private data will likely continue to be topical as the market digests the numbers,” he added.

According to Wednesday’s figures, the unemployment rate dropped slightly to 4.3 per cent.

But the BLS also revised down job gains over the course of last year from 584,000 to 181,000, underscoring that hiring slowed sharply in 2025 after years of strong growth.

The employment level for March 2025 was also lowered by 898,000 on a seasonally adjusted basis.

A volley of fresh reports released last week suggested it was on course to deteriorate further, with lay-offs increasing and job openings declining.

But the latest data will help reinforce outgoing Federal Reserve chair Jay Powell’s argument that the labour market was showing “evidence of stabilisation” as the central bank halted its campaign of rate cuts last month.

The January job gains were driven by the healthcare, social assistance and construction sectors. Jobs in finance and the federal government fell.

Wednesday’s release was delayed from last week as a result of the recent partial government shutdown. The January jobs number came alongside the BLS’s annual benchmark revisions to previously released data.

This is a developing story