One could argue that last week\u2019s surprisingly robust jobs report has made Jerome Powell\u2019s job harder, as it defies the narrative economists had widely believed when it came to the slowing pace of the economy.<\/p>\n
On the other hand, some might argue that the Fed chair\u2019s exit from the top job at the central bank just got easier, because it may support a call for inaction by the rate-setting Federal Open Market Committee (FOMC). <\/p>\n
Prior to Wednesday, speculators had been fairly balanced in their view of whether a 25-basis-point cut would come at the FOMC\u2019s next meeting in March, giving it a probability of around 40%, per CME\u2019s FedWatch<\/a> barometer. But the jobs report<\/a>, showing nonfarm payroll employment rose by 130,000 in January, blew those odds out of the water: They now indicate a more than 92% likelihood of a hold<\/a> at the next meeting.<\/p>\n That inverse relationship comes from the idea that the Fed will only continue to reduce the base rate if it needs to in relation to its mandate: keeping inflation at 2% and maintaining maximum employment. The FOMC may be motivated to cut if job growth was slowing, in order to stimulate the economy. But if jobs look healthy then the Fed may not feel the need to cut.<\/p>\n Powell is facing a \u201cpuzzlement,\u201d according to Oxford Economics senior economist Bob Schwartz. He wrote to clients on Friday: \u201cLike the fictional King of Siam who grappled with what he knows and what he doesn\u2019t know, so too must economists as well as the Fed.\u201d<\/p>\n Schwartz said the employment report \u201cflipped the no hiring\/no firing narrative\u201d that so many Fed watchers had become accustomed to, adding that data from the consumer sector is muddying the path ahead still further.<\/p>\n Throughout 2025 economists had observed that consumption was being driven by wealthy consumers\u2014without whom economic activity would stall and potentially even push the U.S. into a recession. Unsurprisingly, December data had been penciled in as something of a given: Christmas shopping and Boxing Day sales would surely keep tills ringing.<\/p>\n Not so. The Commerce Department last week reported flat growth for the holiday month, compared with healthier years a month prior.<\/p>\n \u201cSuch confusion often leads to inertia, and we suspect that there will be no knee-jerk policy reaction to any of the week\u2019s reports,\u201d Schwartz suggested.<\/p>\n