Do Markets Believe the BLS?

Jobs Report Surprises, Markets Shrug 

The monthly Employment and Wage Report (Jobs Report) from the Bureau of Labor Statistics (BLS) came out this week for January. It was delayed from last week due to the short government shutdown. It was a blockbuster number that should have caused rates to skyrocket up and remove any doubt as to the health of the jobs sector. The rate market shrugged it off. After a short pause following the report’s release, it continued the trend lower. 

Retail Sales Disappoint in December 

The week began with poor economic data that started the lower trend. Retail sales were expected to be strong in December because of the holidays and the season appeared strong after the anecdotal reports. The reading came in at 0.0%, much weaker than the 0.4% growth expected. Core sales, which get plugged into the GDP, fell by 0.1%, lower than the 0.4% growth expected. 

Employment Cost Index Shows Cooling 

The former Federal Reserve (Fed) Chairman Alan Greenspan’s favorite economic report was the Employment Cost Index. It came out showing with a drop in Q4. Overall employment costs, wages, and benefits all fell from 0.8% in Q3 to 0.7% in Q4.  Estimates expected it to remain flat. This is good for wage-pressured inflation because it gives the Fed freedom to continue rate cuts. 

January Jobs Report Mixed 

Then came the BLS. They reported that 130,000 jobs were added in January. However, the previously reported job numbers for November and December were revised lower by a total of 17,000.Inside the report, the private sector added 172,000 jobs, most of which came from the Health Care and Social Assistance sector. This sector is immune to economic trends. 

Seasonal Adjustments Shape the Data 

The BLS employs a statistical technique that we have discussed before called Season Adjustments (SA). The idea is that using modeling, they can adjust the numbers in certain months to account for large employment changes, like the loss of retail jobs after the holidays. By making these adjustments, the month-to-month differences become less drastic, and the yearly averages become more predictable and accurate. 

Markets Question Seasonal Adjustments 

In theory, the SA can be helpful. Right now, there is something clearly broken with the SA that the BLS is using. So let me give you real examples of what I am talking about.  Let’s start with some perspective: The BLS says 130,000 jobs were created in January.  

How many jobs were created in the entirety of 2025? 181,000. Keep in mind, the BLS is also not done revising the 2025 numbers and it will likely go even lower.  

So, enter SA’s. Let’s consider the Non-Seasonally Adjusted numbers. The January figures actually showed a whopping 2.65 million jobs were lost in the month.  This was adjusted up to the 130,000 job gains after SA’s were applied. It is easier to see why the markets are losing faith in this reporting. 

CPI Report Brings Inflation Relief 

The January Consumer Price Index (CPI) inflation report helped rates. Headline inflation came in at 0.2% (non-rounded 0.17%), lower than expectations.  When annualizing this rate, we hit the 2% target right on at 2.04%. The Core CPI rose 0.3%, as expected. There was a little bump in Airline Fares that kept us from seeing a bigger decline in the core. The Annual Core inflation declined from 2.6% to 2.5%. It also appeared that many of the previously tariff-affected prices are no longer showing.   

Looking Ahead: Key Economic Reports Ahead 

This was a great week for rates. Let’s see if we can continue next week: 

Tuesday, February 17: ADP Weekly Employment, NAHB Housing Market Index 

Wednesday, February 18: Durable Goods Orders, Fed Minutes, 20-year auction 

Thursday, February 19: Jobless Claims, Pending Home Sales 

Friday, February 20: Personal Consumption Expenditures (PCE-Fed’s favorite inflation report), Q4 GDP, New Home Sales