The Big Picture
Last Updated: 13-Feb-26 15:03 ET | Archive
Economic data better than expected but not just right
Briefing.com Summary:
*The January jobs and CPI reports beat expectations, but underlying details revealed uneven labor strength and some lingering inflation pressures.
*Payroll gains were concentrated in health care, with downward revisions and sector job losses clouding labor market dynamism.
*Markets may remain volatile as investors scrutinize details beyond headlines for clues on Fed policy direction.
The market received two pieces of key economic data this past week. They were the January Employment Situation Report and the January Consumer Price Index. The former covers the labor market. The latter covers consumer inflation, topics near and dear to just about everyone.
That is partially why they are deemed to be market-moving reports. Other reasons include the fact that they influence monetary policy, consumer sentiment, political views, and growth expectations.
Both reports left an impression this week that could be summed up as better than expected but not just right.
A Tall Order
We'll begin with the employment report. It was released on Wednesday, February 11, delayed from the original report date of February 6 due to the latest government shutdown.
The report featured positive surprises for payrolls, the unemployment rate, average hourly earnings, and the average workweek. There was nothing not to like in the headline numbers, but with a comprehensive report like this one, it was a tall order for it to be pleasing all around.
| Actual | Briefing.com Consensus | Prior | |
|---|---|---|---|
| Nonfarm Payrolls | 130K | 68K | 48K |
| Nonfarm Private Payrolls | 172K | 60K | 64K |
| Unemployment Rate | 4.3% | 4.4% | 4.4% |
| Avg. Hourly Earnings | 0.4% | 0.3% | 0.1% |
| Avg. Workweek | 34.3 | 34.2 | 34.2 |
Some of the main sources of consternation included:
- The recognition that the 130,000 increase in nonfarm payrolls was driven predominately by health care and social assistance jobs (123,500).
- Benchmark revisions showed the total nonfarm employment level for 2025 was revised from +584,000 to just +181,000 (seasonally adjusted).
- Benchmark revisions to not seasonally adjusted data for the total nonfarm employment level from April 2024 to March 2025 were revised down by 862,000.
- Workers unemployed for 27 weeks or more accounted for 25.0% of the unemployed. That was improved from December (26.0%) but well above the same period a year ago (21.1%).
The sum of the parts of this report added up well as talking points, but they didn't add up fully to convince the market that there is dynamism in the labor market.
That notion rang true as well for workers in industries where employment declined month-over-month: mining and logging (-2K), nondurable goods manufacturing (-4K), wholesale trade (-0.4K), transportation and warehousing (-11.2K), information (-12K), financial activities (-22K), and government (-42K).
In brief, the headlines of the report painted a bright picture that got fuzzier looking the closer you looked at the report.
Beauty in Eye of Beholder
The headlines of the Consumer Price Index also had a brighter hue. Specifically, there was disinflation in total CPI and core CPI, which excludes food and energy, on a year-over-year basis. Total CPI was up 2.4% versus 2.7% in December. Core CPI was up 2.5% versus 2.6% in December.
That headline indication was a pleasing sight to the Treasury market, but when it comes to inflation, beauty is in the eye of the beholder.
To that end, you might not care that total CPI was up just 0.2% month-over-month if you were doing a lot of flying. Airfares were up 6.5% month-over-month. A lover of breakfast cereal? Prices were up 2.1% month-over-month. Trying to take a healthier line with fresh fish and seafood? That cost you 3.6% more month-over-month. Enjoy a carbonated drink? Maybe less so with the 1.5% month-over-month increase. Can't kick the tobacco habit? Perhaps you might, given the 5.1% month-over-month increase in tobacco products other than cigarettes (which were up 1.0%).
Are we cherry-picking the data? Yes, we are. There were deflationary readings for other products and services, but the overarching point is that the positive headline surprises for CPI and core CPI are not monolithic.
Inflation pressures continue to lurk in other corners in such a way that they can be menacing for consumer sentiment and politicians facing re-election even if the headline sounds promising for the market and additional rate cuts.
Briefing.com Analyst Insight
Taken together, the January employment and inflation reports reinforced a familiar theme: progress that comes with asterisks. The labor market is holding up, yet its strength is uneven and heavily concentrated. Inflation is cooling, yet not uniformly enough to erase concerns about lingering price pressures in everyday essentials.
For the Federal Reserve and for investors, that leaves the outlook balanced but delicate. The economy is not flashing warning signs of imminent trouble, but with pockets of softness in the labor market and price pressures persisting beneath the headlines, it is unlikely that the stock market will trade with an all-clear signal.
Accordingly, one can expect the fits and starts, as we have been seeing, to continue as economic data faces increased scrutiny below the headlines.
