Please see below, an article from EPIC Investment Partners which discusses the recent revision to the US labour-market data release. Received this morning – 20/02/2026
Investors had an extra week to brace for January’s employment report after a partial government shutdown delayed its release until 11 February. The headline figure — 130,000 new non-farm payrolls — appeared to signal resilience, comfortably above expectations of around 70,000. Yet rates markets were conspicuously unmoved. Two-year Treasury yields barely shifted and fed funds futures continued to imply further easing later this year. The message from fixed income was clear: the headline was not the story.
The significance of this release lies in the annual benchmark revision incorporated into January’s report. The revision lowered the payroll employment level for March 2025 by 898,000 — the largest downward adjustment since 2009 — forcing a reassessment of labour-market performance over the past year. What had been presented as modest but steady expansion now appears considerably weaker. Cumulative job growth for 2025 was revised down from 584,000 to just 181,000, reducing the average monthly gain to 15,000. In retrospect, the labour market’s apparent resilience through 2025 was materially overstated.
That revision reshapes the policy narrative. Monetary settings through 2025 were calibrated against an economy believed to be generating steady employment gains. The revised data suggest labour demand had already cooled substantially. For bond markets, the question is not whether January beat expectations, but whether policy remains restrictive relative to a labour market that has been softer for longer than acknowledged.
The composition of January’s gains reinforces this interpretation. Of the 130,000 jobs added, 124,000 came from health care and social assistance. Health care alone accounted for 82,000. Outside these largely non-cyclical sectors, hiring was subdued. Financial activities contracted by 22,000 positions and federal employment declined by 34,000. Manufacturing and retail were broadly flat. The expansion, such as it is, appears concentrated in sectors supported by demographic trends and public expenditure rather than broad-based private demand.
The household survey adds a further layer of caution. The unemployment rate edged down to 4.3 per cent, yet remains close to levels that, under the Sahm Rule framework, have historically coincided with recession risk once sustained. Multiple jobholding continues to rise, with nearly 8.8m Americans working more than one job. Because the establishment survey counts positions rather than individuals, this dynamic can bolster payroll growth even as underlying household conditions tighten.
Technical factors may also have flattered the headline. Seasonal adjustments and revisions to the birth-death model complicate comparisons with prior months. Weather disruptions arrived after the survey reference week, limiting the drag typically seen in January data. None of these distortions invalidate the report, but they do caution against reading too much into a single print.
For the Federal Reserve, holding the policy rate at 3.50 to 3.75 per cent, the margin for manoeuvre is narrowing. Inflation remains above target, yet the benchmark revision implies that labour-market slack may be greater than previously assumed. The yield curve’s continued inversion reflects expectations of slower growth rather than renewed overheating.
January’s report therefore does not resolve the growth debate; it intensifies it. The headline suggests resilience. The revision suggests fragility. For fixed income investors, the central issue is calibration. If labour demand was already weaker in 2025 than believed in real time, the risk is not that the economy is accelerating — but that policy is still set for conditions that no longer exist.
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Alex Kitteringham
20th February 2026