I recently noticed a market signal that’s well worth paying attention to. The U.S. non-farm payroll report is about to be released, but economists generally expect the data to be worse than market expectations.

Let’s start with the figures. The official forecast calls for an increase of 70k jobs in January, but the mood on Wall Street is quite pessimistic. TD Securities and Goldman Sachs both expect only a 45k rise. Citigroup forecasts 135k, but they also say it’s a seasonal distortion, and after adjustment the result is close to zero growth. Moody’s chief economist was even more direct, saying the market consensus might be around 50k. Any data close to zero shows just how fragile the labor market is.

More importantly, signs of layoffs in the U.S. have already emerged. Recent private-sector data show that in January, both the number of layoffs and hiring hit their worst levels since the 2009 financial crisis. Job openings have plunged to the lowest level since September 2020. Put together, these signals indicate that the labor market is clearly cooling down.

But this isn’t even the most painful part. The U.S. Bureau of Labor Statistics will carry out its annual benchmark revision, and this revision is set to be large. The preliminary adjustment estimate for last September suggests that employment over the past year will be revised downward by 911.1k, nearly cutting it in half. Federal Reserve Chair Jerome Powell said a few weeks ago that the revision could be close to 600k, while Goldman Sachs expects it to be between 750k and 900k. On top of that, with monthly downward revisions throughout this year, the cumulative adjustment has already been reduced by 624.4k.

Even more striking, the bureau will also apply updated seasonal factors and business birth-death projections, which are expected to revise downward another 500k to 700k jobs. When you do the math, more than 1 million jobs basically never existed. This means the true state of the labor market is worse than the official numbers suggest.

The White House is also trying to cool expectations in advance. In an interview on Tuesday, the chief trade adviser said plainly that they must significantly lower their expectations for monthly employment data. They explain low growth as the new normal: policy has reduced the employment growth the labor market needs, while artificial intelligence boosts productivity and suppresses corporate hiring. It sounds internally consistent, but the market clearly isn’t buying it.

The Fed’s stance is also interesting. Officials are more concerned about inflation than unemployment, and they have questioned the necessity of further rate cuts. Both the Dallas Fed president and the Cleveland Fed president said economic progress is going well and they lean toward staying patient. However, according to CME’s FedWatch tool, the market assigns only about a 15% chance of a rate cut in March.

As for market reaction, if the non-farm data disappoints—job gains below 30k and the unemployment rate rises—the dollar could be pressured immediately. Conversely, if the data meets expectations, it may again confirm that the Fed will keep policy unchanged next month, giving the dollar room to rise. But the key will be wage inflation: if average hourly earnings growth comes in below expectations, it will be difficult for the dollar to gain upward momentum.

A Danske Bank analyst noted that slowing wage growth could negatively affect consumer activity, paving the way for the Fed to take a more moderate approach. The ratio of job openings to the number of unemployed persons has already fallen to 0.87. This kind of cooling typically signals a slowdown in wage growth, raising concerns about the outlook for private consumption.

Overall, this report is likely to be a major turning point for markets this year. The acceleration of U.S. layoffs, a substantial downward revision to the employment base, and continued weakness in the labor market will all force policymakers to re-examine the current economic situation. Short-term volatility is unavoidable, but in the long run, these signals all point to a labor market that is stumbling—and deserves close attention.