Strong Jan Non-Farm Jobs: Citi Forecasts Fed Rate Cut in May (Jan 01, 2026)

U.S. nonfarm payrolls for January 2026 rose 130,000, far exceeding the 66,000 median forecast and the 48,000 from December 2025, with the unemployment rate falling to 4.3% from 4.4%. Citigroup analysts, led by Veronica Clark, now project a rate cut in May rather than March, citing stronger-than-expected labor market stability. They note a "not hiring, not laying off" environment with slower job gains and higher attrition. “We expect at least three 25-bp cuts this year, but timing shifts to May, July, and September,” the analysts wrote. They caution that the January numbers do not reverse their view of a gradual labor market cooldown and a potential rise in unemployment in 2026, with 2025’s previously reported gains revised down to 181,000 from 584,000. The pattern of stronger data in fall 2025 and weakness in spring 2026 suggests “a likely reoccurrence of the annual labor market seesaw,” according to Citigroup.