KEY POINTS

• Payroll growth is expected to have slowed to 187,000 new jobs in January, from 223,000 in December.
• But some economists, like those at Goldman Sachs, expect the employment report Friday morning could show more jobs than consensus because it is unclear how many companies are actually laying off workers.
• “Businesses are doing their best to hold on to as many jobs as they can…I think they’re really looking to shed workers through attrition, people quitting, people retiring,” one economist said.

Economists expect slightly slower, but still strong job growth in January, while the impact of corporate layoff announcements is unclear.

According to Dow Jones, the consensus forecast calls for 187,000 new nonfarm jobs in January, down from 223,000 that were created in December. The employment report will be released at 8:30 a.m. ET Friday.

The unemployment rate is expected to edge higher, to 3.6% from 3.5%. Average monthly wage growth is expected to have stayed at about 0.3% in January, while declining on an annual basis, to 4.3% from 4.6%.

Across major technology companies, including Alphabet and Facebook, there have been layoff announcements affecting tens of thousands of workers. Other non-tech firms have also announced staff reductions recently, including FedEx, Dow, and Hasbro. But economists say it’s not clear how much of that will show up in the labor numbers.

Tom Simons, the money market economist at Jefferies, expects 260,000 jobs to be added in January, but he said the number could be even higher.

“The number is not really the number of jobs created, but how many fewer workers were let go,” he said. “Given what we’ve seen in a number of data releases over the month and in the last couple of weeks, businesses are doing their best to hold on to as many jobs as they can…I think they’re really looking to shed workers through attrition, people quitting, people retiring.”

The jobs report is of key importance for the Federal Reserve, which has been trying to slow the economy —and inflation — by cooling the hot labor market. So far, unemployment is still more than a percentage point below where the Fed forecast it will stand at the end of 2023.

Even so, Simons expects markets could react more to a lower-than-expected number of new jobs than a higher one.

“The market is so desperate to find in anything a reason that the Fed is going to pivot. The first really weak employment report the market will be very happy to see,” he said. A higher-than-expected number might be viewed as just an outlier, he added.

Fed Chairman Jerome Powell surprised markets Wednesday with somewhat dovish remarks. One of those comments was his view that perhaps “the economy can return to 2% inflation without a really significant downturn or a really big increase in unemployment.”

Goldman Sachs economists forecast a payrolls increase of 300,000 for last month and said their above consensus forecast was based on the fact that companies do not yet seem to be implementing layoffs, despite the announcements.

The Goldman economists also expect a boost from the return of striking education workers.

“While consensus appears to expect the spike in corporate layoff announcements to weigh on tomorrow’s report, jobless claims have fallen further, and California WARN notices to suggest the majority of these mass layoffs have not yet been implemented,” the economists wrote in a note, referring to Worker Adjustment and Retraining Notifications that give workers advance notice of layoffs.

“Our well-above-consensus forecast also reflects strength in Big Data employment indicators, a boost from favorable seasonal factors that are spuriously fitting to last winter’s Omicron wave, still-elevated labor demand, and a 36k boost from the return of striking education workers,” the Goldman economists wrote. “On the negative side, ADP’s employment data flagged possible disruptions from winter weather and California flooding.”

ADP’s private sector January payroll data released on Wednesday was weaker than expected, with companies adding just 106,000 workers, down from an adjusted 253,000 in December. But weekly unemployment claims, reported Thursday, were at a nine-month low of 183,000.

Mark Zandi, the chief economist at Moody’s Analytics, expects about 175,000 jobs to be created in January, and he does not think it will be so many layoffs that slow down job growth.

“I don’t think the adjustment is coming through layoffs. It’s happening through less hiring. Hiring is back to pre-pandemic levels, and that trend is continuing into January. I think we’ll get a softer number, more consistent with the way the job market is going to go, and what the Fed wants to see,” said Zandi.

Tom Gimbel, founder, and CEO of LaSalle Network said business was fairly strong for his recruiting and staffing firm in January.

“Sales hiring is still up, which is a very good sign,” he said. Gimbel said his temp hiring business was up 5% in January while the search was flat. He said January is typically a very slow period.

“What we’re seeing is small- to medium businesses continue to hire,” he said.

Gimbel said he does not see a recession from his view of the labor market. Accounting and finance continue to add workers.

“In a bad economy, companies cut back on those areas,” he said. “The only negative sign that exists is big tech. What we saw from big tech is they thought people were never coming back to the office again. They overhired.”