GM. This is Milk Road Macro, the newsletter that reads the jobs report like a chef tastes soup: one sip and you instantly know if the Fed’s about to add “cuts” or keep it on simmer.
Here’s what we’ve got for you today:
- ✍️ Everything you need to know about the latest U.S. labor market data.
- 🎙️ The Milk Road Macro Show: Geopolitics Is Now the Macro Driver: Iran, China & the Trades That Matter in 2026 w/ Matt Gertken.
- 🍪 A global markets theme this year has been the 'memory crunch'.
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EVERYTHING YOU NEED TO KNOW ABOUT THE LATEST U.S. LABOR MARKET DATA
This week, we saw the latest data for the U.S. labor market.
And - whisper it quietly - are things improving?
That could be the main takeaway from this week’s jobs report.
The data could also have big implications for the outlook on Fed interest rate cuts.
So, what’s the data?
What’s the latest on rate cuts?
And what does it all mean for asset markets?
Let’s take a look…
So, what’s the data?
The headline unemployment rate (the official jobless rate, measuring people without jobs who are actively looking for work) improved for the second month in a row.
In January, it fell from 4.4% to 4.3%.
After ongoing warnings from many market commentators over the past 18 months about an imminent recession - the unemployment rate is currently an extraordinary 0.1% above where it was 18 months ago…
And if we zoom out, the unemployment rate still remains low relative to historic levels.
Nonfarm payrolls (monthly job growth) printed a surprising 130k, well above expectations.
This was the biggest monthly job gain since December 2024.
Remember, as I’ve highlighted a few times previously, it’s likely that the “breakeven rate” for monthly job growth is a lot lower than it once was.
The U.S. population has seen drastic changes since early 2025 due to the Trump administration’s immigration policies - with immigration levels dropping off a cliff, and population growth may even be negative currently.
This means a “healthy” job growth number to sustain a steady unemployment rate could be in the range of 0-50k.
In this context, 130k is a very good number.
The three-month average for nonfarm payrolls turned positive, signaling a potential stabilization in the labor market.
However, job growth is still heavily concentrated within the healthcare sector, as it has been for many months.
The chart below compares the cumulative job gains in healthcare relative to other segments.
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EVERYTHING YOU NEED TO KNOW ABOUT THE LATEST U.S. LABOR MARKET DATA (P2)
But there were some promising green shoots within the data - with manufacturing logging its first positive job growth number for a long time.
The diffusion index below, showing the percentage of 250 subindustries adding jobs, is also showing signs of stabilization.
It looks to have potentially “bottomed” in mid-2024.
However, we also saw some big downward revisions to historical jobs data.
Payroll gains in 2025 were revised down to 181,000 from the previous estimate of 584,000, averaging out to 15,000 additions per month, and 2024 numbers were also revised down.
Big revisions get a lot of attention - and quite rightly (why can’t they get it right the first time?).
But from a market perspective? They are not really that important.
These latest revisions were widely expected (Fed Chair Jerome Powell even referenced the incoming revisions at the December FOMC) and are heavily concentrated around late 2024/early 2025.
The market understands that revisions are regularly made, and revisions can generally be pretty well predicted and accounted for.
For markets, it is really not that important what the payroll number was 12 months ago, it’s old news - markets are forward-looking.
Elsewhere, Initial Jobless Claims (the number of people claiming unemployment benefits for the first time) still remain at multi-decade lows.
There is simply no sniff of a recession unless/until this chart moves a lot higher.
If you’ve been following my Macro PRO reports - you’ll know I’ve been highlighting that leading indicators for the labor market have been improving for some time.
The ASA Staffing Index - a private weekly measure tracking shifts in temporary and contract work - has historically hinted at where the broader economy may be headed.
It’s been rising for months now - after seemingly “bottoming” in 2024.
Historically, these are classic “early-cycle” signs: businesses see more activity, so they add hours and temps before committing to costly full-time hires.
What’s the latest on rate cuts?
This January print reinforces outgoing Fed Chair Jerome Powell’s argument that the labor market “is showing evidence of stabilization” as the central bank kept interest rates unchanged in January.
Any hopes of a rate cut at the next Fed meeting in March were largely taken off the table by interest rate market traders.
The odds of a March cut now sit at just 8%.
Additionally, expectations for the next Fed rate cut have been pushed back from June to July.
But the market still expects roughly two cuts to occur this year.
So, what does this all mean for asset markets?
From an asset markets perspective, this jobs report was all in all pretty neutral.
Both the S&P 500 and bitcoin whipsawed around - but ended up roughly where they started.
Rate cuts aren’t dead - they’ve just been pushed forward into the “Warsh window”.
This jobs report did two things at once: it reassured the market that the U.S. economy is not rolling over and recession risk is falling (it wasn’t very high anyway), and it reminded everyone why the Fed doesn’t need to hurry.
But Wall Street still broadly believes we get two, or maybe three, cuts before this “cutting cycle” is over.
The disagreement isn’t if - it’s when.
This week’s jobs report raised the bar for a near-term cut because it removed urgency.
A Fed that’s staring at a labor market that’s stabilizing can comfortably demand more proof on cooling inflation.
And we won’t have to wait long for inflation data - with the latest CPI print to be revealed on Friday (February 13).
Wrapping up
From an asset market perspective, it’s always difficult to know whether good jobs data is “good news” (resilient economy) or “bad news” (less chance of rate cuts).
On the whole, this was a good jobs report.
But rate cuts are still expected this year.
So that’s really an ideal scenario - signs of an improving labor market and expectations for future Fed easing still remain in place.
But we’ll see an inflation report tomorrow - which could shift rate cut expectations again.
Further evidence of cooling inflation will likely push rate cut expectations higher, while signs of sticky inflation will likely push rate cut expectations lower.
GEOPOLITICS IS THE 2026 MACRO DRIVER 🌍
In today’s episode, we sat down with Matt Gertken, Chief Strategist, Geopolitical and U.S. Political Strategy at BCA Research, to talk about how Iran, China, and rising tail risks are shaping markets. The conversation connects geopolitics to oil, safe havens, and portfolio positioning.
Here’s what you’ll hear:
- Why Iran instability and Strait of Hormuz risk can spark near-term oil shocks.
- How weak China demand, EVs, and shale supply tug oil lower, while conflicts can spike it.
- What Xi’s tighter control and China’s slowdown mean for growth, AI, and semiconductors versus the U.S.
- Practical portfolio takeaways, gold and silver hedges, and key signals to watch across 2026.
Hit play and see for yourself 👇️
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One big feature of global markets this year has been the “memory crunch” - with memory chips in short supply and big gains for the stock price of memory chip manufacturers. Lenovo revealed it expects the shortage to persist through 2026.
Apple shares slid lower on reports of new snags in the long-planned upgrade to its Siri virtual assistant. The latest hitches are part of a long saga for Apple, which first announced plans for the revamped Siri in June 2024.
The latest inflation report will be released on Friday, with forecasters expecting core CPI to have decelerated to 2.5%. The report could continue to show that any potential tariff effects on inflation are steadily fading.
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