Jobs Data Strong, But Negative Revisions Again

Last week saw U.S. stocks finish mostly lower across the board with big cap tech stocks like Alphabet and Amazon falling after earnings and holding down the indices, while the majority of stocks are holding up better as earnings growth is broadening. The S&P 500 fell 0.24%, a muted performance given the heightened daily volatility. In fact, the tech sector is the only negative sector so far this year and is off to its worst start to the year relative to the S&P 500 since 2013. Most of that comes down to the fact the top tech stocks (like the Magnificent 7) being priced to perfection while earnings for all other companies are broadening out.

The best sector so far this year has been financials, which have benefited from higher interest rates and the now expectation rates will stay higher for longer. Last month, most banks reported better than expected financial results and forecasts that were better than expected, driven by higher rates and the strong consumer.

The week’s headlines continues to be dominated by the Trump administration and from a market perspective more specifically tariffs and the potential impacts. As promised, Trump announced tariffs on Canada and Mexico on February 1, but those were quickly delayed 30 days as both sides agreed to take multiple measures to improve border security and use the additional time to continue other negotiations.

On the other hand, the trade war with China escalated after Trump announced tariffs on Chinese goods which saw a quick response of retaliatory tariffs by China on U.S. imports as well as new firms being added to China’s “unreliable entities list” and an anti-monopoly investigation into Google. A scheduled call between Trump and President Xi was cancelled, with Trump saying there was no rush to talk, delaying possible negotiations and possibly leading to an escalation.

This is expected to remain a key headwind in markets and lead to continued volatility, similar to like what was experienced in 2018 when the U.S. last engaged in a trade war with China, before ultimately achieving favorable trade terms.

Outside of earnings and tariff news, the big headline last week was on jobs data. It began Tuesday with the job openings survey that showed the number of job openings fell to its lowest level of 7.600 million, excluding one month last year, since coming out of the pandemic. At the same time hires were lower and trending below the pre-pandemic range while the number of quits is trending in the same direction, indicating workers are finding it harder to switch jobs or find a higher or better paying job.

The most followed report on the jobs market is the Department of Labor’s monthly employment report. Its establishment survey showed businesses added 143,000 payrolls in January, within the range of expectations. It also saw upward revisions to job growth for November and December by an additional 100,000 jobs.

However, there has been questions on the reliability of the data the past several years. This is due mostly to the substantial revisions we see annually. Every February the DOL calculates revisions for the prior year through March, and this year saw a downward revision of 589,000, or about 50,000 less per month, meaning the DOL saw 2.4 million new payrolls over the 12-month period, less than its initial estimate of 2.9 million. It also revised data from the household survey to incorporate the large flow of immigration – while the number of people employed was revised up 2.0 million, it was due to a 2.9 million increase in population versus prior estimates.

While the news is not terrible and the jobs market is still growing, it does reflect the fact the monthly data goes through substantial revisions and the job market was not as strong in 2024 as initially thought.

This week we will see another wave of quarterly earnings reports, mostly smaller companies, along with a testimony to Congress from Fed Chairman Powell, and the next round of inflation data. 



Week in Review:

It was a muted week in terms of returns for stocks last week with the major indices finishing as follows: S&P 500 -0.24%, Russell 2000 -0.35%, Nasdaq -0.53%, and Dow -0.54%. The Treasury yield curve saw a flattening, with shorter term yields rising and longer term yield falling – the 2-year Treasury yield increased 8 basis points to 4.30% while the 10-year yield fell 4 basis points to 4.50%. After a strong run higher, the dollar index posted a 0.3% decline for the week. Gold closed with a new record high after increasing 1.9% for the week for the sixth straight week of gains. Bitcoin fell 5.7%, giving up recent gains. Meanwhile, oil fell 2.1% for the third straight weekly loss. 

Recent Economic Data

• Job Openings & Labor Turnover Survey: The number of job openings was 7.600 million as of the last day of December, about 400k below expectations and down from 8.156 million from November and outside of September was the lowest level since coming out of the pandemic in early 2021. The number of hires is about 500k below pre-pandemic range and the lowest since the early 2010s at 5.462 million. The number of quits was 3.197 million and has been trending in the low three million range since last summer, about half a million below the pre-pandemic range indicating workers are less confident in finding a better or higher paying job.

• ADP Payrolls: ADP reported it saw 183,00 new payrolls in January, a little above the 153,000 expected and about 60k more than the growth in December. It noted job growth was stronger in consumer facing industries but weak in business services and production.

• Jobless Claims: The number of jobless claims the week ended February 1 was 219,000, an increase of 11k from the prior week, with the four-week average at 216,750. The number of continuing claims was 1.886 million, rising 36k from the prior week with the four-week average up slightly to 1.872 million.

• Employment Situation: Nonfarm payrolls grew by 143,000 in January, right in the range of expectations and just below the 12-month average of 166,000. Job gains were strongest in retail trade, education and health, and government, with declines in mining, manufacturing, and professional services. December ended up being a much stronger month after revisions, with payroll growth revised up 51,000 to 307,000 while November was revised up 49,000 to 261,000, a significant reversal of the trend the past two years that saw consistent downward revisions. However, the February report includes annual revisions for the past year through March where employment was 598,000 less than previously estimated. Flipping to the household survey, the data was quite strong – total employment increased 2.234 million. But this was also due to revisions from the massive inflow of immigration the past several years leading to a 3 million increase in overall population due to updated population estimates versus the 12-month average of only 44,750. Meanwhile, the number unemployed declined 37,000. This resulted in another decrease in the unemployment rate to 4.0% from 4.1% last month. The average wage increased 0.5%, higher than the recent trend, with the 12-month change in wages at 3.9%.

• Trade Balance: The U.S. saw its trade deficit balloon in December, rising to $98.4 billion for the second highest trade deficit the country has ever seen. Exports fell 2.6%, or $7.1 billion, to $266.5 billion, while imports increased 3.5%, or $12.4 billion, to $364.9 billion. The data can be taken several ways, but one is that with imports so strong, the U.S. economy remains the strongest economy around the globe. The volume of trade, a good indication of overall activity, was $631.4 billion, up a very strong 8.0% over the past year, or $46.8 billion.

• PMI Manufacturing Index: The PMI Manufacturing index was 51.2 for January, an improvement of almost 2 points from December and above the breakeven level of 50 that splits expansion from contraction conditions. New orders and output returned to growth. The survey responses noted a boost in confidence about business conditions improving from the new president drove a 34-month high in the outlook of new production.

• ISM Manufacturing Index: The ISM Manufacturing index improved to 50.9 in January, up 1.6 points from December and moving into expansion territory for the first time in 27 months. The survey noted new orders expanded along with production and employment but notes uncertainty around tariffs may have temporarily boosted demand ahead of implementation. The prices index increased to 54.9 with more general price increases.

• Factory Orders: Factory orders fell 0.9% in December, a little more than the 0.6% decline that was expected and comes after a 0.8% decline from November. The reason was transportation, where orders declined 7.4% due to a 46% decline in nondefense aircraft orders, which is a highly volatile category. Excluding transportation orders rose 0.3%. Shipments of goods increased 0.4% in the month, 0.2% when excluding transportation.

• Construction Spending: Construction spending in the U.S. increased 0.5% in December, picking up pace from the no change in November. Spending on residential rose 1.5% while spending on nonresidential fell 0.2%. Over the past year spending is up 4.3% driven by a 3.0% increase in nonresidential spending and a 6.1% rebound in residential.

• ISM Services Index: The ISM services index was 52.8 for January, indicating activity in the services sector slowed compared to December as the index dropped from 54.1. New orders were at 51.3, much lower than expected and the weakest since June. Employment was 52.3, up from last month but still close to the breakeven level. The prices paid index was at 60.4, still elevated but lower than the 65 range that was expected, suggesting inflationary pressures still exist. Of the 18 major industries surveyed, 14 reported growth and 3 reported contraction.

• Productivity & Costs: Productivity of American workers increased at an annual rate of 1.2% in the fourth quarter which was lower than the 1.8% increase expected and a big slowdown from the 2.3% gains seen in Q3. Productivity is output minus hours worked, where output grew 2.3% and hours worked increased 1.0%. From 2023-2024 average productivity increased 2.3%. On the other hand, unit labor costs increased 3.0% in the fourth quarter due to a 4.2% increase in hourly compensation and 1.2% increase in productivity, rising from a more muted increase in Q3. Recall that productivity is important because it is one of the biggest drivers of longer-term economic growth.

• Consumer Sentiment: Consumer sentiment for January was a big disappointment. According to the survey results, the sentiment index was 67.8, more than 4 points lower than expected and the weakest level since November 2023. The current conditions index was 68.7, down from 74.0 last month and the preliminary estimate of 77.9. The expectations index was 67.3, down from 69.3 last month. A big surprise was the expectations on inflation over the next 12 months was 4.3%, a significant jump from the 3.3% expectation in December, which may be due to recent data and fears of tariff impacts. The 5-10 year inflation expectation moved up to 3.3% for the highest level since 2008.

Company News



• Apple: Apple has discontinued its project to build advanced AR (augmented reality) glasses that would pair with its family of devices, another setback in its latest attempts to create a headset for the typical consumer after a weaker launch of its Vision Pro VR headset, according to Bloomberg. It notes finding the right product at the right costs has proven to be a challenge. It canceled the project after failing to revamp the design, first attempting to pair it with the iPhone, but too much processing power was required, then attempting to pair with the Mac, but the product performed poorly during reviews.

• Apple: Bloomberg reported Apple is likely to unveil the newest version of its entry level iPhone, the iPhone SE, in the next several days and is expected to start selling later this month, the first update for the iPhone SE since 2022. The SE is a cheaper model of the iPhone and the one that has a home button still and does not use FaceID. The new version is expected to have Apple Intelligence incorporated and the first iPhone to incorporate Apple’s in-house modem that is has worked to developed for several years.

• Salesforce: Salesforce said it is planning to lay off over 1,000 employees as part of its restructuring and at the same time will hire for roles to sell its new AI products after seeing success in its Agentforce, a platform for creating AI virtual representatives. This is part of its ongoing strategic shift to AI-driven business.

• Cleveland Cliffs: Shares of Cleveland Cliffs were down after it provided a Q4 and full year revenue outlook that was lower than current estimates due to lower demand from the automotive industry especially in the second half. Its CEO said other than the Covid-impacted 2020, it was the worst year for domestic demand for steel since 2010.

• Super Micro Computer: Super Micro Computer shares moved higher after it said it will provide a Q2 business update this upcoming week. Historically the company would update its guidance after the end of the quarter and before reporting full quarter results and it has typically been to update stronger than expected forecast. It also said its new AI data center systems powered by Nvidia’s newest Blackwell chips (its most advance chips) are now ready to ship. Super Micro, who builds out the infrastructure that goes into data centers like server rack and cooling systems, said it has reach full production availability and eased rising concerns about supply chain constraints.

• PepsiCo: PepsiCo shares were lower last week after reporting earnings that were lower than expectations for its latest quarter and provided guidance that was also below expectations due to subdued trends in its North American markets, particularly its salty and savory snack categories. It also indicated it will look to add more healthy snacks to its portfolio due to the “higher level of awareness in general of the American consumer toward health and wellness,” driven by the conversation around obesity/weight-loss drugs.

• Honeywell: Honeywell reported its earnings results and with it announced it would split into three independent companies after facing activist pressure since last year. It will separate its aerospace division from its automation business, then spin off its advanced materials business to create three companies; Honeywell Automation, Honeywell Aerospace, and Advanced Materials. The split is expected to be completed in the second half 2026 and will be tax-free to shareholders. The split is expected to be completed in the second half 2026 and will be tax-free to shareholders.

• Honda/Nissan: The merger talks to combine Nissan and Honda have reportedly been called off after Nissan found it an issue of becoming a subsidiary.

• TikTok: An exclusive report from the Washington Post said ByteDance may let TikTok discontinue its US operations rather than approve a sale as part of a deal with the Trump administration. 

Other News



• Tariffs:
• Tariffs that were imposed on Mexico will be delayed 30 days after Mexico agreed to terms including sending 10,000 national guard troops to the border to prevent drug trafficking and enhanced border security after a conversation between Trump and Mexican President Claudia Sheinbaum. The two nations plan to hold additional negotiations over the next month.
• The U.S. will also delay tariffs on Canadian imports for 30 days after PM Trudeau held a conversation with Trump. Trudeau said Canada would implement its $1.3 billion border plan to reinforce border security with new technology and personnel, increase resources to stop the flow of fentanyl including appointing a new fentanyl czar, will list cartels as terrorists, and launch a new joint task force with the U.S. to combat organized crime.
• China said it was retaliating with tariffs on imports of multiple products from the U.S. including LNG, coal, oil, agricultural machinery, and cars, while placing several consumer companies on its “unreliable entity list” which restricts their ability to operate in China. Its Commerce Ministry also pledged to file a lawsuit against the U.S. to the World Trade Organization (WTO) claiming a blanket tariff was a serious violation of international trade rules and was "discriminatory and protectionist." China also announced it was reviving several antitrust investigations into companies like Google, Nvidia, and Apple. Importantly, China did not impose tariffs on agricultural products, which would have indicated a more significant escalation.

• Lower Rates: Treasury Secretary Bessent said in a Fox interview that he and Trump are focused on bringing down the 10-year Treasury yield, not calling on the Fed to lower rates, when it comes to Trump’s desire to bring down interest rates.

• U.S. Sovereign Wealth Fund: Trump signed a new executive order to establish a U.S. sovereign wealth fund as he had promised during his campaign. The Treasury and Commerce Secretaries will be tasked with establishing the fund over the next 12 months.

• Sanctions on Iran: Trump signed a directive that orders his administration to ramp up economic pressure on Iran via sanctions and tougher enforcement of existing measures. It is estimated that relaxed enforcement and sanction evasion over the past four years has allowed Iran to boost its oil exports by about 1 million barrels/day.

• Government Employee Buyout Offer: Early reports say about 1% of federal workers or about 20,000 workers have accepted Trump’s buyout offer (voluntarily quit with pay/benefits continuing through September, or face the risk of being laid off).

• Tax bill:
• After seeing a deadlock due to the significant price tag, Republicans are now considering extending tax cuts, that are set to expire at the end of this year, another five years instead of the original plan of 10 years. It is also now considering delaying action on tax cuts until Congress passes a budget reconciliation package, according to Bloomberg. This would conflict with House Speaker Johnson’s plan to combine many of Trump’s priorities into one single bill that would make it harder for some of the divided Republicans to reject.
• Trump met with Republicans late last week and laid out the tax priorities that includes the end to the carried interest loophole, expanding the state and local (SALT) tax deduction, removing the tax on tips, ending tax on social security benefits, removing tax on overtime pay, and extending the 2017 tax cuts.
• House Speaker Johnson says the tax/spending bill would be announced this weekend. He also reiterated his desire for “one big bill” to address Trump’s agenda.

• Fed Comments: Dallas Fed president Lorie Logan said even if inflation comes in closer to its target in the next few months, she does not believe there is more room for rate cuts if the labor market and consumer spending remains strong, leading her to believe monetary policy would not be meaningfully restrictive in that scenario, in other words, believing the “neutral rate” has moved higher. 

Did You Know. . .

Multiple Job Workers

Last month the share of workers with more than one job was 5.3% of the workforce, which was the highest since 2019, according to the Department of Labor data. Outside of a brief period at the end of 2019, it was the highest rate since 2009, when the U.S. was recovering from the Financial Crisis. Economists say the share of workers with multiple jobs historically rises when jobs are plentiful, as they have been since the pandemic, although slowing recently. It was also observed that those with a higher education were more likely to hold multiple jobs, a trend that has increased since the pandemic. About 8.2% of those with a Doctorate degree held multiple jobs while just 3.8% with a high school diploma held multiple jobs. Economist say this could be due to the increase amount of remote work or gig work.

WFG News & Events

Tax Documents

Please see this release to understand the timing on when to expect tax documents.

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