What’s expected from Friday’s jobs data?

The market may have been softer in 2023 than anticipated.

A monthly US jobs report due Friday will probably show a slower pace of hiring in 2023 following annual revisions, according to Bloomberg Economics.

The report is also likely to show employers added 160,000 workers to payrolls in January, with hiring continuing to be concentrated in government and health care, Bloomberg economists Anna Wong and Stuart Paul wrote Thursday in a preview of the release.

“We think the most important signal will be the revisions to past nonfarm payrolls, which could show the labor market was actually softer than realized last year,” Wong and Paul said.

“With abnormal weather patterns affecting January, job gains and household employment that month will be too noisy to provide reliable guidance.”

The latest data suggest the labor market is continuing to gradually cool amid elevated interest rates. A weekly report on filings for unemployment insurance out Thursday showed an uptick in claims, though they remain low by historical standards.

Friday’s report will contain annual benchmark revisions to 2023 hiring figures, and downward adjustments could alter the outlook for Federal Reserve policy, according to Wong and Paul.

Fed Chair Jerome Powell on Wednesday described the labor market as “strong” after the central bank’s rate-setting Federal Open Market Committee voted to leave its benchmark unchanged and temper investor expectations for rate cuts as soon as March.

“Reduced hiring momentum entering this year could test Fed Chair Jerome Powell’s belief that the Fed can afford to wait longer before cutting rates,” Wong and Paul said. “Though the odds of a March rate cut – our base case — have diminished since Powell’s remarks after the Jan. 31 FOMC decision, a negative surprise could change things quickly.”

The Bloomberg team also sees the unemployment rate edging up to 3.8%, from 3.7% in December, and growth in average hourly earnings stepping down to 0.3%, from 0.4%.

Its projection for hiring is below the median estimate in a Bloomberg survey of outside forecasters, while its unemployment and earnings estimates match the consensus predictions.