Why another unexpectedly hot jobs report could derail markets

Wall Street was taken aback by the US labor market’s resilience in January. Another unexpectedly hot report could shake things up again.

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link. Wall Street was taken aback by the US labor market’s resilience in January. Another unexpectedly hot report could shake things up again. The January jobs report showed that the US economy added a stunning 353,000 jobs that month and the unemployment rate stayed at 3.7%. That all but cemented investors’ belief that the Federal Reserve won’t cut interest rates at its March policy meeting, and, coupled with hot inflation data, raised doubts about whether the Fed would cut rates at all this year. Those fears waned after Federal Reserve Chair Jerome Powell indicated in his congressional testimony this week that he’s not taking rate cuts off the table. Investors cheered Powell’s signal, helping push the S&P 500 index to close at a record high Thursday. “We believe that our policy rate is likely at its peak for this tightening cycle,” Powell said on Wednesday. “If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.” Still, the central bank hasn’t made it clear when it will begin paring back rates, keeping investors on edge ahead of key data releases. Economists expect that the US economy added 200,000 jobs last month, according to FactSet estimates. While far below January’s searing tally, that estimate would be a continuation of a historically strong labor market that’s stayed resilient against interest rates at a 23-year high.