What the US Jobs report means for the Fed

Speakers

Claudia Sahm — Chief Economist, New Century Advisors (Creator of the Sahm Rule)

Eric Winograd — Senior Economist, AllianceBernstein

Host — Anchor

Summary

The headline "1 million jobs lost" via benchmark revisions is misleading; it occurred over the prior 12 months and was largely anticipated by the Fed (preliminary estimates released in Sept).
The labor market is stabilizing rather than crashing: January payrolls lifted and unemployment ticked down, though the longer-term trend shows a gradual drift upward in unemployment.
A "Soft Landing" is the base case: Wage growth is slowing and labor demand is lagging supply, but without the abrupt collapse typical of recessions.
Immigration dynamics have been volatile ("hit a wall"), complicating data interpretation, but the core signal is a cooling, not freezing, economy.

Trade Ideas

Ticker	Direction	Speaker	Thesis	Time
US EQUITIES /GROWTH TECH /S&P 500	LONG	Claudia Sahm Economist, Federal Reserve Board	Sahm notes the -900k/-1M revisions were "not a surprise to the Fed" as preliminary data was known in September. She characterizes the recent January data as "the best possible outcome" with payrolls lifting and unemployment ticking down. The market's fear was that the massive downward revisions indicated the Fed was "behind the curve" on a crashing economy. Sahm clarifies that this is old news and the current data shows stabilization. If the economy is cooling (slowing wages) but not collapsing (positive payrolls), the "Soft Landing" narrative holds. This removes the immediate recession tail-risk, favoring broad equity exposure. LONG. The data supports a Goldilocks scenario where the Fed can cut rates gradually into a stable economy. If the "gradual drift up" in unemployment accelerates into a nonlinear spike (triggering the Sahm Rule for real).	—
US TREASURIES /INTEREST RATES	LONG	Claudia Sahm Economist, Federal Reserve Board	Sahm states, "We still see wage growth slowing, unemployment rate drifting up... labor demand for workers is not keeping up with the supply of workers." A labor market where supply exceeds demand is disinflationary. Slowing wage growth removes the primary sticky inflation threat. This gives the Fed the green light to cut rates to prevent the "gradual problem" from becoming a recession. Bond yields should fall (prices rise) as the market prices in these cuts and the cooling growth outlook. LONG (Buy Bonds / Bet on Lower Rates). If immigration or supply shocks re-ignite inflation, forcing the Fed to hold rates higher for longer.	—
US CONSUMER /ECONOMY	WATCH	Claudia Sahm Economist, Federal Reserve Board	Sahm explicitly warns, "For groups like people new to the labor market, this is a very tough job market." She also notes the revisions show we were "destroying jobs" in certain months last year. While the aggregate numbers look okay, the "marginal buyer" (new entrants, lower income) is under stress. If new entrants cannot find work, household formation and discretionary spending (retail, autos, housing) will face headwinds. This suggests a bifurcation where the economy grows, but the consumer sector may struggle with volume. WATCH. Be cautious on consumer discretionary stocks exposed to entry-level or lower-income demographics. The "tough market" spreads to prime-age workers, causing a collapse in aggregate consumption.	1:07