U.S. stocks in the red as NFP data fail to meet forecasts

U.S. stock markets lost ground on Friday following lower-than-expected jobs data. The Nonfarm Payrolls (NFP) data, released on the same day by the U.S. Department of Labour, revealed that during January there were 151,000 new job fillings. However, there were higher expectations prior to the report’s release by analysts who were expecting a much healthier number of 190,000. In addition, January’s data was also significantly lower than the previous month of which jobs fillings were 262,000. Given that the NFP data is one of the most important economic factors influencing the Federal Reserve’s (Fed) monetary policy decisions, there now appears to be a lower likelihood of an interest rate increase by the Fed during their next meeting of 15 March.

 Despite the discouraging January’s NFP data, the release of a separate report by the Department of Labour showed that the unemployment rate for the same month fell to 4.9%. The last time that the rate was under the 5% level was back in 2008 when the financial crisis began, while January’s average hourly earnings increased by 0.5% to $25.40.

 It seems labour market data for the first month of 2016 has been a mixed bag, and so it is hard to make any safe assumptions for how the Fed will take it. It is risky to just estimate that the Fed might pull back from an interest rate increase in March just because of the weak payrolls data and one would think that the world’s largest economy policymakers will also consider the recovery of the unemployment rate and salaries. Hence, Friday’s data alone are not enough to affect the Fed’s decision on a subsequent and marginal interest rate increase, upcoming economic performance reports between now and March will also be taken into account.

 Stock markets reacted immediately to the mild NFP data, the Dow Jones Industrial Average dropped on Friday by 1% to 16,128, while the S&P 500 and NASDAQ also decreased by 1.5% to 1,874.76 and 3% to 4,021.76 respectively.