On Friday, the Bureau of Labor Statistics will deliver the first jobs report for 2024, and it’s expected to underscore the strength of the US economy despite 11 rate hikes from the Federal Reserve.

The labor market snapshot comes just days after Fed Chair Jerome Powell said he’s encouraged about the healthy economy and the downward trajectory of inflation, but cautioned that “we still have a ways to go” before declaring victory on the proverbial soft landing (bringing down inflation without raising unemployment levels).

Economists believe the labor market definitely still has enough fuel in the tank to continue on that soft landing path: They’re forecasting a monthly gain of 176,500 jobs and for the unemployment rate to tick higher to 3.8% from 3.7% (but staying under 4% for the 24th consecutive month), according to FactSet consensus estimates.

Still, between Thursday and Friday, there is plenty of labor market data to unpack, more noise than usual to cut through and greater chances for volatility.

Cutting through the noise

January is typically a big month for job losses, with seasonal workers being let go after the holidays and other companies tightening their belts at the outset of the calendar year.

That can make the January jobs report among the trickiest to forecast, said Sarah House, a senior economist with Wells Fargo.

“We’re going to have new seasonal [adjustment] factors for a month that is the most seasonal of any month,” she said. “That makes it pretty difficult just right off the bat, never mind that we’re coming off a December that was on the warmer side and could have supported hiring in December.”

To better see the underlying trend for this and other months, the BLS applies seasonal adjustment factors to smooth out the data. Those are updated annually in January.

All told, there’s a chance for an upside surprise in the numbers, Boussour wrote, noting that EY expects a monthly gain of 275,000 jobs.

Friday’s jobs report also will include the final annual benchmark review of payroll data for the 12 months that ended in March 2023. Preliminary data showed that US job growth was weaker than previously thought by 306,000 jobs (or about 25,000 fewer per month).

“As is typically the case, we expect the final revision to be very close to the preliminary revision,” Boussour wrote.

Additionally, the BLS will revise the household survey data (one of two surveys that make up the jobs report) to account for new population estimates. Those could skew month-over-month comparisons for some of the labor force data.

What’s with all the layoffs?

Much like this time last year, headlines have been dominated by large-scale layoffs at tech, media and transportation firms.

And, much like this time last year, they’re creating some heartburn as to whether these are signs of broader instability in the labor market.

But for now, they appear to be fairly siloed, said Daniel Zhao, lead economist at employment review and job search site Glassdoor.

The technology layoffs appear to be an extension of the “year of efficiency” mantra from last year, Zhao said, adding that these companies appear to be streamlining rather than acting out of a place where they’re no longer financially viable.

“Some of these layoffs that are more about streamlining and getting more efficient aren’t necessarily a risk for spilling over into the broader economy,” he said.

The data tends to agree: Through December, the monthly number of layoffs and the rate of layoffs as a percentage of total employment remain well below pre-pandemic averages, according to BLS’ Job Openings and Labor Turnover Survey (JOLTS) data updated earlier this week.

Also, Worker Adjustment and Retraining Notification Act filings — federally required notices of impending mass layoffs or plant closures — haven’t picked up on a year-over-year basis, Wells Fargo’s House said.

“Those have slowed a little bit, signaling that we’re not about to see an imminent pickup in layoffs unless you really see a sharp deterioration in demand,” she said.

Still, businesses are having to be more disciplined in terms of their headcount amid changing labor market dynamics; specifically, far fewer people are quitting, she said.

Workers are voluntarily leaving their jobs at the lowest rate since the fall of 2020, JOLTS data shows. The hiring frenzy of recent years has leveled out, and there are fewer open jobs; plus, job-switchers have less of a financial incentive now: Their median annual pay gain in January was 7.2%, the lowest since May 2021, according to payroll processor ADP.

“The fact that you had a sharp slowdown in the rate in which people are voluntarily leaving their jobs, companies have been a little bit caught off guard with their overall headcount, thinking that they may be able to manage the headcount through attrition and finding that the dynamics of departures have changed dramatically,” said House.

Fresh data on job cuts and productivity

On Thursday, the layoff picture became clearer.

US-based employers announced 82,307 job cuts in January, a 20% decline from the 102,943 cuts announced in January the year before, according to a Challenger, Gray & Christmas report released early Thursday.

However, excluding January 2023, last month’s job cuts were the highest seen in January since 2009, according to Challenger.

“As we step into 2024, the landscape is shaped by stabilizing prices and the anticipation of falling interest rates; it is also an election year, and companies begin to plan for potential policy changes that may impact their industries,” Andrew Challenger, senior vice president of the outplacement and research firm, said in a statement. “However, these layoffs are also driven by broader economic trends and a strategic shift towards increased automation and AI adoption in various sectors, though in most cases, companies point to cost-cutting as the main driver for layoffs.”

The biggest reason cited for last months’ job cuts was “restructuring” (28,329), followed by “closing” (14,555) and market/economic conditions (7,559). Artificial intelligence was cited as the reason behind 381 cuts last month, according to the report.

Unemployment claims — another gauge of layoff activity — remain below what was seen before the pandemic; however, they increased more than expected last week, according to data released by the BLS on Thursday.

First-time jobless claims increased by 9,000 to 224,000 for the week that ended on January 27. Continuing claims, which are filed by people who have received benefits for at least one week, grew by 70,000 filings to 1.898 million — the highest they’ve been since mid-November of last year.

Rising continuing claims can indicate that it’s getting harder for unemployed people to find jobs.

However, a separate indicator shows that businesses were highly efficient to close out 2023.

US worker productivity grew 3.2% in the fourth quarter, according to a BLS report released Thursday. While that’s down from 4.9% in the third quarter, it surpassed expectations for a 2.1% gain. Productivity growth can help reduce inflationary pressures.

A potentially ‘fragile situation’

In 2023, the theme of the labor market was “resilience.”

Through 2023, the US added nearly 2.9 million jobs, according to non-seasonally adjusted data from the BLS. Barring impending revisions, last year marked the 21st highest annual total among records that go back to 1939.

It was not supposed to go that way. After all, the most aggressive monetary policy campaign seen in decades was sure to hurtle the economy into a recession.

Instead, job growth remained strong but slowed as expected; and although wage growth eased a fair bit (much to the Fed’s liking), people’s paychecks finally weren’t being entirely erased by inflation. Consumer spending remained robust, as did overall economic growth.

“What was supposed to be the hardest mile in the marathon for the Fed on inflation morphed into a relay race,” Diane Swonk, chief economist at KPMG, told CNN in an interview. “Job gains went from sectors that drove the economy out of the recession, very interest-rate sensitive sectors, to those sectors that are less sensitive to interest rates.”

But the United States isn’t out of the woods yet by any means.

The primary drivers of job growth in recent months have been health care, leisure and hospitality and the public sector, while hiring in most other industries has petered out.

“You are in a more fragile situation than you were a year ago, given the gains — potentially outside of January — thus far for the past six months had been concentrated in three sectors,” Swonk said. “And we’ve seen a vulnerability there already expressed, and October is a case in point.”