By Ann Saphir
Feb 11 (Reuters) - Federal Reserve policymakers who voted last month to hold short-term borrowing costs steady rather than continue their string of interest-rate cuts may feel more secure in that decision after government data Wednesday showed the U.S. job market began 2026 on better footing than expected.
The Bureau of Labor Statistics, in its shutdown-delayed report, said payrolls rose by 130,000 in January, compared with the 70,000 economists had forecast. The unemployment rate ticked
down to 4.3%.
The stronger-than-expected report "provides ammunition to the Fed hawks to maintain a patient approach to rate cuts, reinforcing the narrative of a stabilizing labor market," wrote Angelo Kourkafas, a strategist at Edward Jones.
Traders of interest-rate futures agreed, moving to price out all but a one-in-five chance of a Fed policy rate cut by April, versus about a two-in-five chance seen before the data.
Though they are still betting the U.S. central bank will next reduce its policy rate in June, they see almost a 40% chance it will not move then, versus about 25% before the jobs report.
Fed policymakers voted 10-2 last month to keep short-term borrowing costs in the 3.50%-3.75% range, after cutting rates at each of the last three meetings of 2025. They cited a stabilizing labor market and above-target inflation.
Fed Governor Christopher Waller, one of the two dissenters, said after the decision he felt the labor market last year was far weaker than appreciated and showed it could weaken substantially from here. Waller had been among the earliest Fed policymakers last year pushing for the rate cuts the central bank eventually delivered.
His view of 2025 got some backing in revisions to last year's job-market figures, also published Wednesday, that put the estimated average monthly job growth in 2025 at 15,000. That was an anemic pace more usual at the start of a recession than during a period of healthy economic growth.
From 2010 to 2019 the average payroll gain was 183,000 each month, more than all of last year's increase.
But it was not quite the "Zero. Zip. Nada" job growth that Waller had thought the revisions would show, and with January's job-growth surge, the latest three-month average job gain is now around 73,000.
The data appears to bolster the view, laid out by Dallas Fed President Lorie Logan on Tuesday, that downside risks to the labor market have diminished meaningfully. Logan, one of the Fed's leading opponents of further Fed rate cuts, said that at this point she was more worried about inflation.
The next official inflation report is due out on Friday, and economists expect it to show underlying consumer prices excluding energy and food ticked up in January.
(Reporting by Ann Saphir; additional reporting by Howard Schneider and Lucia Mutikani, Editing by Andrew Heavens and Chizu Nomiyama )
