Russell 2000, Dow Jones futures react to the strong US NFP data

The US labour market is surging on, signaling that the economy is still strong. Data by the Bureau of Labour Statistics (BLS) revealed that the economy added 353 jobs in January, higher than the expected 155k and the ADP estimate of 107k.

Further numbers revealed that the jobless remained at 3.7% in January while wage growth continued. The average hourly earnings rose by 4.5%, higher than the headline inflation rate of 3.4%. The labor participation rate also continued to rise during the month.

These numbers confirm that the American economy is having one of the strongest recoveries in the developed world. Earlier this week, the IMF pointed that the US growth will help the global economy rebound this year.

These numbers came shortly after the Federal Reserve delivered its first interest rate decision of the year. In it, the bank decided to leave rates unchanged between 5.25% and 5.50%. Jerome Powell, the head of the bank maintained that the Fed will maintain its data-dependence when deciding the time to start cutting.

Other recent economic numbers have shown that the economy is doing well. On Thursday, a report by the ISM noted that the manufacturing PMI figue jumped to 50.2 in January, a sign that the sector is expanding.

A separate report published in January showed that the US GDP expanded by 3.3% in Q4, higher than the median estimate of 2.0%. In all, the real GDP rate stood at 2.5% in 2023 and the IMF expects it to grow by 2.1%. Most notably, the closely-watched Atlanta Fed GDP Now tool estimates that the economy will grow by 4.2% in Q1.

Therefore, with inflation still above the Fed target of 2.0%, some analysts are questioning the need for rate cuts. 

The next important data to watch will be the upcoming Consumer Price Index (CPI) data, which will provide more details about prices. 

The US dollar index (DXY) rose slightly to $102.80 while futures tied to the Dow Jones, Russell 2000, and S&P 500 index pared back some of their gains.