The January jobs report came out and delivered an upside surprise for the second month in a row. Consensus expectations were that we would see a gain of 150,000 jobs largely due to omicron which may have led to a temporary slowdown in hiring similar to what happened during the summer with delta.

One data point supporting the idea of a weak number was the ADP jobs figure which is a measure of private payrolls that showed a 300,000 decline. However, unemployment claims remained depressed which supported the notion that the jobs market was in good shape.

The stock market initially moved lower as the number does indicate a stronger economy but this bullishness is tempered by increasing odds of a more hawkish Federal Reserve. Yields on short-term Treasuries moved to new multiyear highs with the 2-year reaching 1.29%. Many market participants speculated that a strong CPI print could lead the Fed to hike by 50 basis points in March. Odds of this increased to 27% following the jobs report.

Overall, payrolls surged by 467,000 for the month, and the unemployment rate ticked up to 4%. Expectations were for a 150,000 increase and a 3.9% unemployment rate due to omicron depressing economic activity including large portions of people sick or self-quarantining for periods of time.

Another positive was the several revisions for previous months. December was revised higher to 510,000 from 250,000, while November was increased to 647,000 from the previous 249,000. This means that 6.6 million jobs were created in 2021, a record for the country.

Wages also increased by 0.7% and an annual increase of 5.7%. The labor force participation rate rose to 62.2%, a 0.3 percentage point gain. That took the rate, which is closely watched by Fed officials, to its highest level since March 2020 and within 1.2 percentage points of where it was pre-pandemic. In total, the economy is now 1.7 million jobs below its pre-pandemic levels.