4 Reasons to Cheer the January Jobs Report

The participation rate increased to 62.7 percent, suggesting that workers who had been discouraged are returning to the labor force.

The unemployment rate fell to 4.9 percent, the lowest in nine years.

All this means that more Americans have jobs and are getting paid more. It also suggests tighter labor market conditions, drawing workers back in and increasing potential output. And this is a positive sign for the prospects for consumption — the biggest component of U.S. gross domestic product and the main driver of the economy. This signal is particularly notable amid weaker global growth and recurring bouts of financial market volatility.

Financial markets will welcome signs of improving fundamentals. But they also will be concerned about what the data indicate regarding the willingness of central banks to continue to support asset prices through exceptional measures, which markets have been conditioned to embrace wholeheartedly as a driver of financial returns.

Specifically, the January report will serve as a reminder that it is too early to fully eliminate the possibility that the Federal Reserve, the most powerful central bank, will raise rates in March. As a result, the data is likely to lead to an uptick in market yields, and cause some nervousness in U.S. equity markets. But, in a perfect world, such concerns over the Fed would become a sideshow over time, provided that fundamentals continue to improve.