US Jobs Data Surprises to the Upside, Boosting Stocks and Pushing Back Fed Rate Cut Expectations
By Kathleen Brooks, Research Director UK
Date: 11 February 2026
Key Takeaways
- Resilient US labour data boosts economic outlook.
- US labour market gaining momentum.
- Market reaction sees scaled back rate cut hopes, but the dollar remains weak.
Overview of the Payrolls Report
The recent payrolls report was notable for two reasons: it was released on a Wednesday and included revisions for 2025 alongside the January Non-Farm Payroll (NFP) figure. The revisions indicated a significant downward adjustment of 862,000 jobs, revealing that there was virtually no job growth in the US last year, with four months in 2025 showing negative NFP figures.
Resilient US Labour Data
Despite the weak performance in 2025, the labour market has shown signs of recovery as we enter 2026. Non-Farm Payrolls increased by 130,000 last month, which was double the economists' expectations. The unemployment rate also fell from 4.4% to 4.3%. Notably, private sector payrolls surged to 172,000, significantly exceeding analyst estimates, indicating that while government jobs moderated, the private sector compensated for the decline.
Momentum in the Labour Market
While job growth was generally weak throughout 2025, recent months have seen an acceleration in job creation. The three-month average for payrolls has risen to 73,000, up from just 17,000 in December. This suggests that the US labour market is gaining momentum and may continue to strengthen as it aligns with broader economic growth.
Market Reaction
The positive labour market data led to a significant market reaction. US Treasury yields increased across the curve, with the 2-year yield rising by more than 6 basis points. Initially, this provided some support to the dollar, which saw a spike in the dollar index, particularly against the Japanese yen. However, these gains were not sustained as the market remained focused on the prevailing weak dollar trend, exacerbated by uncertainties surrounding US trade policy, particularly threats from Donald Trump regarding the North American trade pact.
Impact on US Equities and Rate Cut Expectations
The strong NFP data has supported continued gains in US equities, with a notable reduction in expectations for rate cuts by the Federal Reserve. Currently, only two rate cuts are anticipated for the year, with the timing of the first cut pushed back to July from June. Unless there is a significant downside surprise in the upcoming US Consumer Price Index (CPI) data, it is unlikely that a rate cut will occur in the first half of the year.