President Donald Trump doubled down on his demand for lower interest rates Wednesday after a surprisingly strong January jobs report — while markets reacted in textbook fashion by trimming expectations for rate cuts.
The U.S. economy added 130,000 jobs last month, well above expectations of 70,000 and nearly triple December’s revised 48,000, according to the Bureau of Labor Statistics.
The unemployment rate unexpectedly fell from 4.4% to 4.3%, while wage growth accelerated 0.4% month over month and 3.7% year over year.
The headline strength, however, was accompanied by sweeping downward revisions. Payrolls from April 2024 through March 2025 were cut by 898,000 jobs.
For all of 2025, job growth was revised down to just 181,000 — an average of 15,000 per month, marking the weakest year outside of a recession since 2003.
Trump: “Great Jobs Numbers”
Trump focused squarely on the January upside surprise, brushing aside the historic revisions.
“Great jobs numbers, far greater than expected!,” he wrote on social media.
He added that the United States should be paying “much less” on its borrowings, stressing that strong economic performance warrants sharply lower interest rates and could save “at least one trillion dollar per year” in interest costs.
Trump’s logic — that strong economic data justifies lower rates — runs counter to traditional monetary policy thinking, where robust labor markets typically reduce the urgency for rate cuts.
Markets Trim Rate-Cut Bets
Investors responded not to Trump’s call, but to the strength in the labor data.
Before the report, traders were assigning roughly a 75% probability to a 25-basis-point rate cut in June, as per CME FedWatch tool. That fell to 57% after the release.
Similarly on prediction platform Polymarket, there is a 39% chance the Fed holds steady in June, rising by 9 percentage points after the report.
The market pricing for two rate cuts by year-end also softened, with Fed futures now assigning a small but non-zero probability that the Federal Reserve leaves rates unchanged for all of 2026.
‘A Feast For The Hawks’
Bank of America economist Aditya Bhave described the report as “a feast for the hawks.”
“The star of today’s hawkish report was the unemployment rate, which declined one-tenth to 4.3% and that too for good reasons,” Bhave said, highlighted the drop reflected solid household employment gains.
He added that benchmark revisions were largely concentrated in the second half of 2024, which matters less for forward-looking policy decisions.
The broad-based strength in January, he said, supports the view that the Fed is unlikely to cut rates in the near term.
Attention is increasingly turning to what policy could look like under a Kevin Warsh-led Federal Reserve, once Jerome Powell’s term concludes in May.
Bank of America continues to forecast two cuts under a Warsh-led Fed. But Bhave cautions that a further decline — or even stabilization — in the unemployment rate could narrow the path to easing.
If the jobless rate remains at or below 4.3% by midyear, the Fed may also find itself constrained, potentially staying on hold despite political pressure.
For now, January’s strong labor data has strengthened the hawks’ hand — and left Trump calling for rate cuts that markets are increasingly reluctant to price in.
Image: Shutterstock
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