2/6/2026 Private Sector January Jobs Report Highlights U.S. Predicament, Delayed BLS Jobs Report Out Feb. 11

A recently published January jobs report by ADP Research, a labor market and employee performance research firm, once again put a spotlight on the U.S. jobs market, with about 22,000 private sector jobs added overall including 74,000 jobs in healthcare, but with another monthly decline in manufacturing jobs, a sector that has been shedding jobs on a monthly basis since March 2024. The reported 22,000 figure was drastically below Dow Jones' consensus estimate of 45,000 jobs added.

In another report published by Challenger, Gray and Christmas, an employment and business services firm, a January surge in job cuts was indicated, with U.S. employers cutting over 100,000 jobs, the highest for the month since 2009. The most-affected sectors in January were transportation, technology, then healthcare.

In contrast, the Federal Reserve Bank's Federal Open Markets Committee (FOMC) at the end of last month paused interest rate cuts due to data showing a stabilizing unemployment rate and a still-elevated inflation rate. With this new private-sector data and uncertain hiring numbers as reported by the Bureau of Labor Statistics (BLS) because of, among other factors, recent U.S. government shutdowns, the Federal Reserve appears to have a much more difficult job translating data into policy. BLS was still recovering from a government shutdown running from October to mid-November 2025 when a brief, 3-day partial shutdown hit at the start of February, delaying the January 2026 jobs report to February 11, 2026. Now that the government is largely funded to the end of the 2026 fiscal year, delays and distortions should become less likely and official statistics more accurate.

What about the health of the U.S. economy at large? Although the Federal Reserve opted to put a hold on interest rate cuts at least until mid-March, recent reports suggest that labor markets may be weaker than originally thought even as inflation remains above the Fed's 2% inflation target. Even were this the case, a correction by the FOMC in mid-March after more data has been published should be enough to arrest this unfavorable change.

A larger question looms over the Federal Reserve Bank in May of this year, as Jerome Powell's term as Fed chair is set to end, and Kevin Warsh, a former Fed governor with an apparent preference for a smaller Fed balance sheet and lower interest rate targets may take the same, pending Senate approval. Mr. Warsh has expressed an interest in running the U.S. economy hotter, and utilizing nascent artificial intelligence technology to increase worker productivity without causing runaway inflation, thus creating a sustainable boom as former Fed chairman Alan Greenspan was able to do in the 1990s.

However, there are many key differences between the economy of the 1990s and of today that could very much complicate this link between technology and productivity growth, among them Mr. Warsh's own preference for a smaller Federal Reserve balance sheet, the shrinking of which in rounds of quantitative tightening would result in higher long-term interest rates even as short-term rates were cut.

Other factors also appear to create less than optimal conditions for an economic boom without accompanying high inflation rates (the "virtuous cycle") including the Trump administration's affinity for tariffs, combined with a weaker U.S. dollar, significantly pushing up input costs of imported goods used in capital investment and the sustaining of a growing economy; and the possibility of tighter labor markets. Though labor markets currently appear weak but stabilizing, according to the Fed, a dramatic economic expansion spurred by much lower borrowing costs may tighten labor markets to a point where wage growth would overtake productivity growth, even with the help of AI, a realistic scenario considering the official unemployment rate is still quite low at 4.4% in December per BLS. Labor market tightness would not be helped by the Administration's continued anti-immigration efforts. Finally, increased long-term interest rates due to inflation and quantitative tightening could also put a damper on investment.

Though much is still uncertain about the U.S. economy in February 2026, there seems to be more downside showing than upside at this point. Were a new Fed chair approved that could garner enough votes on the FOMC to cut interest rates faster in an attempt at explosive economic expansion, the U.S. economy could overheat. That is not to say, such a Fed would not be able to rein in accelerating inflation through subsequent rate hikes, but such a scenario would result in higher interest rates across the curve.

Greenspan openly criticized the "command-type systems" that some foreign economies used to pursue a degree of economic success prior to experiencing significant difficulties caused by the very same systems. A parallel, then, can be drawn to China's depressed property market of today and perhaps to a U.S. economy of tomorrow under the second Trump administration's economic populist-style policies. Something to think about.

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Recommended Reading: "Testimony of Chairman Alan Greenspan: The Federal Reserve's semiannual monetary policy report, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate July 21, 1998". https://www.federalreserve.gov/boarddocs/hh/1998/july/testimony.htm

References

1. https://www.federalreserve.gov/boarddocs/hh/1998/july/testimony.htm

2. https://adpemploymentreport.com/

3. https://www.cnbc.com/2026/02/04/adp-jobs-report-january-2026.html

4. https://www.challengergray.com/blog/challenger-report-january-job-cuts-surge-lowest-january-hiring-on-record/

5. https://www.federalreserve.gov/newsevents/pressreleases/monetary20260128a.htm

6. https://www.cnbc.com/2026/02/04/january-jobs-report-government-shutdown.html

7. https://www.conference-board.org/research/CED-Newsletters-Alerts/partial-government-shutdown-ends

8. https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

9. https://www.ft.com/content/9b9cd6e6-a0b9-453f-b293-975a486a925d

10. https://www.reuters.com/business/finance/investors-ramp-up-bets-steeper-yield-curve-under-warsh-led-fed-2026-02-03/

11. https://www.bls.gov/news.release/empsit.nr0.htm

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