The US jobs report for January was surprisingly good

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The US jobs report for January was amazing all around. Nonfarm payrolls increased by 517,000 in the month, shattering analyst estimates of 187,000. The unemployment rate fell to 3.4%, the lowest level since May 1969.

US stocks fell broadly on Friday, worried about what this strong jobs report means for the future of interest rates, and all indices posted losses. Asia-Pacific stocks closed mixed on Friday, as troubled India's Adani Enterprises managed to close up 1.38%.

Amazon shares took a hit after the company's earnings report, dropping 8%. Although Apple and Alphabet both posted disappointing quarters as well, Alphabet stock was down 2%, while Apple stock was up 2%.

The damage done to Adani Enterprises by the US Hindenburg Research short sale to the Indian conglomerate was not contained. Wall Street names like Vanguard and BlackRock are also getting hit.

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bottom line

In normal economic times—that is, the past 20 years or so of low inflation, moderate unemployment, and slow growth—January's employment numbers would have been cause for celebration. Whichever angle you look at it, the report shined: 517,000 hiring increases—nearly three times what analysts expected. An unemployment rate of 3.4% - the lowest in more than 50 years. Hourly wages growth of 0.3% -- strong, but still moderate from the rest of the year.

However, the markets fell on the news. On Friday, the S&P 500 fell 1.04% to 4136.48, the Nasdaq Composite lost its flaming streak and fell 1.59%, and the Dow Jones Industrial Average fell 0.38%. True, the indices may have been reacting to earnings: Apple, Alphabet, and Amazon, which have a combined market capitalization of nearly $5 trillion, all had fourth-quarter results that had more misses than results. Investor disappointment was reflected in the company's share prices (although it should be noted that Apple shares actually rose 2% after suffering an early loss), which in turn was echoed by the indices.

However, foremost on investors' minds should definitely be how the jobs report will affect the Fed's interest rate path. Central bankers have repeatedly emphasized that they are looking at economic data to determine how far hikes should go. The question is: which set of data to prioritize? We know that inflation, consumption and manufacturing numbers fell in December. But the January jobs report paints a picture of an incredibly strong labor market that may keep inflation persistently high, especially in the services sector, which saw most of the gains last month. Federal Reserve Chairman Jerome Powell has indicated that he is focused on the labor market, which he described as "lopsided" in his post-meeting press conference on Wednesday. The Fed may have to force investors who bet on a pause or pivot rate to find a new balance as well.