Traders have strengthened expectations that the US Federal Reserve will hold interest rates steady next month, after a new government report showed employers added more jobs last month than predicted.
Data released by the Bureau of Labour Statistics (BLS) on Wednesday showed nonfarm payrolls increased by 130,000 in January, while the unemployment rate fell to 4.3 per cent. Employers were expected to add 55,000 jobs last month, with the nation's unemployment rate holding steady at 4.4 per cent, according to the Dow Jones consensus estimate.
At the same time, the delayed jobs report featured major revisions that reduced the number of jobs created last year to 181,000, compared with the previously reported figure of 584,000.
After the report's release, traders pencilled in a 94 per cent chance the Fed will hold interest rates steady at between 3.5 per cent to 3.75 per cent next month, CME Group data showed.
The Fed, whose monetary policy decisions are typically followed by most central banks in the Gulf, is expected to keep rates on hold until its meeting in June.
"It appears the labour market is closer to stabilisation than rapid deterioration and this will embolden the hawks on the FOMC [Federal Open Market Committee] to push for no changes to the Fed funds rate for the foreseeable future," Wells Fargo economists said.
Trader enthusiasm on the jobs report dipped during intraday trading. The Dow Jones Industrial Average was virtually flat on the day after futures were up 200 points, while there was little movement in the S&P 500. The Nasdaq Composite declined slightly at 0.23 per cent.
The yield on the 10-year Treasury rose 1.6 basis points to 4.161 per cent and the 30-year climbed less than 1 basis point to 4.797 per cent. Yields on the two-year, which closely tracks Fed policy decisions, surged 4.8 basis points to 3.502 per cent.
The US dollar index jumped 0.09 per cent to 96.89.
The Fed was expected to closely watch Wednesday's report for growing signs of a weakening labour market, with the nation's unemployment rate a key factor in deciding whether or not to reduce rates next month. The BLS report also showed hiring in January was far stronger than the downwardly revised 48,000 jobs added in December.
Despite the payrolls increase, the labour market is still seen as softening, even as economic growth has been robust. Economists have said US President Donald Trump's immigration and tariff policies have weighed on the jobs market.
Disagreements over the health of the US labour market also weighed on the Fed when it met last month. The US central bank at the time held rates steady in a 10-2 decision. Fed governor Christopher Waller, who argued in favour of lowering rates, warned 2025 data would be revised to show there was "virtually no growth" in payroll employment.
