Don't be fooled by the January non-farm payrolls! Moody's "dampens the mood": The US labor market remains extremely fragile

Caixin News Agency, February 12 (Editor: Bian Chun) The U.S. Bureau of Labor Statistics released a better-than-expected January non-farm payroll report on Wednesday, showing an increase of 130,000 jobs. However, Moody’s Chief Economist Mark Zandi warned not to take this optimistic data lightly.

This figure far exceeded economists’ expectations of 75,000 new jobs, but Zandi believes this growth trend will not continue.

Zandi has repeatedly warned that the U.S. economy’s foundation is unstable and may fall into recession. On Wednesday, he posted on X (formerly Twitter) that the latest employment data does not alleviate his concerns at all.

“The labor market remains fragile and highly susceptible to shocks,” he said. “Yes, employment increased by 130,000 in January, but considering the significant downward revisions to historical data, there has been no real employment growth since April last year (the day of liberation).”

Zandi also pointed out that almost all of the January job gains came from the healthcare sector, which he sees as not a good sign for the overall U.S. economy.

“Without the healthcare industry, the U.S. economy would lose a large number of jobs, and the unemployment rate would rise,” he said in an interview. “There are reasonable reasons for the increase in healthcare jobs, but it also indicates that once the healthcare sector faces issues or even just slows hiring, the job market and the entire economy could become very fragile.”

This is not his only concern. Zandi also warned that AI impacts could further weaken an already fragile job market, and he believes this influence is rapidly approaching. Although the effects of AI are not yet reflected in macroeconomic data, Zandi insists that the situation will change soon.

The economist also added that he believes rising layoffs will be the most obvious sign that the job market is beginning to crack. Companies like Amazon, Meta, and Pinterest have recently announced large-scale layoffs, and the number of layoffs across the economy last month reached its highest level since 2009.

“The most effective real-time indicator of layoffs is the weekly initial unemployment claims,” Zandi said. “Currently, this data is about 225,000 per week, which is low. If this number exceeds 250,000 for more than a week, the job market will be in trouble.”