'Risk Of Overheating': 4 Experts On Hot January Jobs Report, How The Fed Will React

Zinger Key Points
  • The U.S. added 517,000 jobs in January, beating average economist estimates of 187,000 jobs.
  • "Today’s payroll number is certainly a head scratcher for most market participants," one market expert says.

The SPDR S&P 500 ETF Trust SPY traded lower Friday after the Labor Department reported blowout U.S. jobs market numbers from January.

The U.S. added 517,000 jobs in January, beating average economist estimates of 187,000 jobs. The unemployment rate dropped to 3.4%, below economist estimates of 3.6%. Wages were up 4.4% year-over-year and increased 0.3% from December.

Related Link: Blowout Jobs Report: US Adds 517K Jobs In January, Nearly Triple Economist Expectations

Labor Market Too Tight: Jeffrey Roach, chief economist for LPL Financial, said an unemployment rate of 3.4% means the labor market is too tight for the Federal Reserve.

"No doubt the Fed will continue to increase rates at the next meeting to slow the demand side of the economy," Roach said.

Quincy Krosby, Chief Global Strategist for LPL Financial, said the red-hot jobs report and 3.4% unemployment rate has investors concerned the Fed's path to price stability may be longer than expected.

"The undeniably strong report is what markets hope for coming out of a recession, but not what you want to see when expectations for the end of the Fed rate hike campaign is suddenly challenged by a significantly stronger labor market ," Krosby said.

Related Link: Why These Analysts Are Warning Investors January Stock Market Rally 'Will Not Last'

Charlie Ripley, senior investment strategist for Allianz Investment Management, said the silver lining for the Fed is that wage inflation has declined from 4.8% to 4.4%.

"Today’s payroll number is certainly a head scratcher for most market participants as the 517k gain was well above estimates along with the unemployment rate going the opposite direction the Fed would like to see," Ripley said.

5% Rates Coming? Bill Adams, chief economist for Comerica Bank, said the jobs report increases the probability the Fed's terminal interest rate will exceed 5%.

"Wage growth is still slowing in the January jobs report, but its other details will make the Fed worry more about the risk of overheating (unless data revisions totally change the picture again)," Adams said.

Market Movers: Here are some of Friday's biggest S&P 500 gainers and losers following the jobs report:

  • Gen Digital Inc GEN was down 9.1%.
  • Ford Motor Company F was down 7.5%.
  • Marketaxess Holdings Inc MKTX was down 6.2%.
  • Clorox Co CLX was up 5.8%.
  • Gilead Sciences, Inc. GILD was up 3.3%.
  • Schlumberger NV SLB was up 3%.

Photo via Shutterstock.

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Posted In: Analyst ColorNewsEcon #sTop StoriesFederal ReserveAnalyst RatingsAllianz Investment ManagementBill AdamsCharlie RipleyComerica BankemploymentInflationInterest RatesJeffrey RoachLPL FinancialQuincy KrosbyUnemployment
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