US Macro Insights: January 2025 NFP Preview

January 2025 NFP Preview

Major data release, with various revisions, to set the tone on the macro front?

• Every January sees the release of both the standard monthly jobs data as well as annual benchmarks and tweaks to the birth-death model. However, this report is notably significant given the focus on revisions and the concerns over the true underlying health of the job market. In our view, the balance of risk is skewed towards a stronger monthly job reading (in the low 200k area) but the markets will be focused on the unemployment rate (U/R), which we see ticking up, as well as the revisions, which can break in either direction.
• We anticipate a continuation of the bond rally, led by the front end, if there are only minor adjustments to the benchmark revisions and the birth-death (B/D) model goes against historical trends (revised downward), along with a higher unemployment rate. We would put less emphasis on the headline NFP print if it is under 250K, and instead focus more on the CES-QCEW revision, the impact of the new B/D model, and most importantly, any rise in unemployment. The risk is that this January will be the last in the trend of solid NFP releases, as upcoming job reports start to factor in less immigration and fewer federal workers, as well a smaller contribution to employment from the B/D model.