TD Securities expects January US nonfarm payrolls to rise by 45k, below the 70k consensus. The unemployment rate is forecast to stay at 4.4%. There is a hawkish risk if it falls to 4.3% instead of rising to 4.5%.
Private payrolls are projected to increase by 40k, led by stronger gains in healthcare and construction. Government payrolls are expected to rise by 5k.
The unemployment rate is expected to be unchanged at 4.4%. However, uncertainty is higher because of a BLS population adjustment that is expected to be negative. TD Securities links labor market stabilization to the pause in rate cuts at the January FOMC meeting.
The note also highlights yield curve dynamics. TD expects a bear flattening and more market focus on the unemployment rate. A 10-year auction is scheduled for the afternoon. It also flags lower continuing claims as a reason the unemployment rate could fall to 4.3%.
December retail sales were flat versus expectations of +0.4% m/m, while TD forecast -0.2%. The control group fell 0.1% versus forecasts of +0.4% and TD’s +0.1%. November was revised down to 0.2% from 0.4%. This trims TD’s Q4 GDP tracking estimate to 2.6% q/q annualized.
We expect a weak January Nonfarm Payrolls report, with only 45,000 new jobs versus a 70,000 consensus. This would fit with the flat retail sales data at the end of 2025, which suggested the consumer is cooling. It supports the view that last year’s momentum is fading.
The key figure is the unemployment rate, which we expect to hold at 4.4%. But it could slip to 4.3%. That would point to a tighter labor market and could make rate cuts harder for the Federal Reserve. This mix of slower job growth and low unemployment could drive a bear flattening in the yield curve, where short-term rates stay elevated.
In 2025, some payroll reports that looked weak at first were later revised much higher, which hinted at underlying strength. With January CPI showing core inflation still sticky at 3.1%, the Fed has limited room to cut rates early. In this setup, a jobs upside surprise may move markets more than a downside miss.
For traders, this mixed outlook supports using options to manage risk around the payrolls release. A long straddle on short-term interest rate futures could help position for a larger-than-expected move in either direction. Given the uncertainty, paying an options premium may be preferable to a direct directional bet on yields.
Consumer weakness also bears watching, especially after the drop in the retail control group late last year. Traders may want to monitor consumer discretionary derivatives, such as options on the XLY ETF. If upcoming data shows more consumer fatigue, protective puts on this sector could be a useful hedge in the weeks ahead.
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