Unexpected Resilience in the Labor Market? | S3 E121 | 02-11-26

The labor market just surprised investors and it may change the Federal Reserve narrative.

In today’s episode of Markets with Megan, Megan Horneman breaks down the delayed January Non-Farm Payrolls report, which showed the U.S. economy added 130,000 jobs, beating expectations and signaling more resilience than many anticipated.

Despite prior concerns about weakening job openings and rising layoffs, this report revealed encouraging signs:

📈 Payroll growth beat forecasts

⬇️ Unemployment ticked down to 4.3%

👷 Temporary workers increased for the third straight month — often a leading indicator of hiring strength

⏱️ Average workweek rose, another positive signal

🏥 Gains in private education, health services, and professional/business services

Although annual revisions showed fewer jobs were created last year than previously reported, the weakness appears to be further behind us. The data suggests the labor market may be stabilizing — not deteriorating.

For the Federal Reserve, this likely means no rush to cut interest rates. A resilient jobs market gives policymakers room to stay patient, especially ahead of upcoming inflation data.

Markets reacted sharply rallying initially before reversing, highlighting just how sensitive investors remain to labor and inflation signals in early 2026.

📊 Is the labor market finding a bottom?
📉 Will the Fed stay on hold longer than markets expect?
📈 And what does this mean for equities going forward?

Megan walks through what investors should watch next.

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https://youtu.be/6VmZ616ynhE

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Transcript

Fast Intro And Setup

Megan Horneman 0:00

The labor markets proved a lot more resilient than some had anticipated. It is Wednesday, February the 11th, and this is Markets with Megan. If you like this podcast, subscribe, hit the alarm bell. You can share with friends, family, or colleagues.

Delayed Jobs Report Context

Megan Horneman 0:13

But we're here today to break down the economic data. And this morning we received the uh non-farm payroll report for the month of January. Now, because of the government shutdown, it was delayed. Usually we get it on the first Friday of the month, but we received it on a Wednesday today.

Headline Payroll Beat Explained

Megan Horneman 0:28

And the markets initially really like this data. So let's dig into it. Um, the uh US non-farm payrolls, the change for January was an addition of 130,000 jobs. So this was much better than anticipated. We're looking at some data indicators, whether you look at the three-month moving average of payrolls or you look at the unemployment rate. It looks like we might be trying to find a trough and maybe move a bit higher.

Revisions And What They Mean

Megan Horneman 0:56

Now, we also received the annual revisions for payroll um additions and subtractions for the prior year. And we did actually have a million less jobs created, but you're still you're seeing that that might have been pushed prior to the most recent data. So the weakness was further behind us than was anticipated. And it does suggest that the Fed probably should have started cutting rates when they did. Um, so that's good news from uh the inflation and then these the confidence in the

Green Shoots In Labor Details

Megan Horneman 1:26

central bank. But what we're seeing now is that we're we're getting some green shoots here. That's what people say. When you're getting these positive um momentum, you've got the work week that rose. Um we one of the indicators we look at is temporary workers. And if temporary workers are continuously being reduced, that means that that's an indicator of leading, uh leading weakness in the jobs or jobs market because typically companies don't um fire people that fire their full-time employees, they just don't hire as many temporary workers. So um, what we saw was temporaries work temporary workers rose. That's actually the third consecutive month. Some

Sector Winners And Laggards

Megan Horneman 2:01

of the other areas that saw pretty good job creation was in the private service um producing jobs. So think of private education and health. That's all a pretty big uptick, and then professional and business services. Now, leisure and hospitality, that was they created a thousand jobs for the month. So that's been slow. It's been weak, and that's been kind of like a bright spot when it comes to the labor market. And then where the continual uh reduction comes from is those government jobs. So we saw those as weak as well.

Unemployment, Participation, And Fed Stance

Megan Horneman 2:31

Now the unemployment rate ticked lower on this, and that's because the labor force participation rate actually ticked higher. So we have um a lower unemployment rate at 4.3%. This is good news for the Fed. The Fed can continue to remain on hold. They're not in a rush to have to cut interest rates. This is also counters some of the data we received last week, whether it was on the Challenger's Jobs report or the job postings. Those things insinuated some further weakness here in the jobs jobs data, but this data is not showing that. Now, a lot of noise around some of these indicators, so we won't take this one month as a trend. We'll continue to follow this data, but for now, we think it keeps the Fed on hold. There is no rush.

Data Noise, CPI Ahead, Market Volatility

Megan Horneman 3:12

Now, Friday, we'll get the inflation information. And again, markets might swing on that if that shows either a hotter number or a more tame number than what's anticipated. We saw quite a bit of volatility today in the equity markets. First, as I mentioned, with this data, we saw equities rise significantly, and then we saw them reverse that loss, and now it's been up and down all day, relatively muted from an equity standpoint.

Wrap And Where To Find More

Megan Horneman 3:37

That's all we have today. If you want a history of our podcast, you go to markets with Megan.