No wonder Powell didn’t commit to extra hikes. Here are five reasons the January jobs report may be too good to be true.

There’s reason to believe that, at least on the payrolls front, the January numbers were a one-off.

Economists at Morgan Stanley point out that the January number reflects three factors it believes to be temporary: unusually warm weather, the resolution of California higher-education strikes and a very strong seasonal adjustment boost. “Seasonal effects are a zero-sum game over the year, so it is likely that the boost in January will be paid for by weaker prints through the first half of the year,” they said in a note published late on Tuesday.

Steve Englander, head of North American macro strategy at Standard Chartered, delves into another set of numbers produced by the Labor Department, the Quarterly Census of Employment and Wages. This report is the subject of a new analysis from the Philadelphia Fed that made its way onto Zero Hedge and then Tucker Carlson. The long and short of it is, the Philadelphia Fed’s analysis of QCEW data found that second quarter of 2022 jobs were overstated by roughly a million.

Englander is not alleging a vast conspiracy. But he finds the QCEW data, which is based on administrative data on more than 10 million establishments, quite reliable, and his own regression found the risk of a 1.1 million overstatement in payrolls in the second quarter. “It is a long way from a suspicious deviation in Q2-2022 data to a January 2023 employment surge, but it raises the possibility that NFP is more erratic than in the past,” he says.

Being based on such a huge set of data, the QCEW takes far longer to compile. The QCEW report on the third quarter of 2022 will be released on Feb. 22, so in two weeks. “If the Q3-2022 QCEW release points to any degree of labor-market softness, questions on the reliability of NFP could be raised,” he says.

Englander further notes the household survey — the part of the jobs report used to calculate the unemployment rate — also points to a softer jobs picture than the payrolls number suggests. The household report also suggests that nearly all the jobs created over the last year are part time.

The market

U.S. stock futures ES00 NQ00 were lower after Tuesday’s 266-point gain for the Dow Jones Industrial Average DJIA. The dollar DXY was lower, while the yield on the 10-year Treasury BX:TMUBMUSD10Y was 3.66%.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

As it rolls out its AI-enhanced Bing search engine, Microsoft MSFT said every point of market share its search engine gets is a $2 billion revenue opportunity, though at a lower margin. Relatedly, the U.K. regulator said an in-depth independent investigation on Microsoft’s proposed acquisition of Activision Blizzard ATVI  provisionally finds the deal raises concerns about cloud and console gaming.

Chipotle Mexican Grill CMG missed expectations on both earnings and same-store sales. Uber Technologies UBER rose after forecasting adjusted earnings ahead of Wall Street forecasts.

Walt Disney DIS earnings are due after the close.

CVS Health CVS said it’s buying Oak Street Health OSH for $10.6 billion, in an all-cash deal that had been rumored in recent days.

A number of Federal Reserve officials are speaking, including New York Fed President John Williams and Fed Governors Lisa Cook and Christopher Waller.

Economists at Goldman Sachs said President Joe Biden’s State of the Union speech pushed back on the debt-limit debate, took cuts to Social Security and Medicare “even further off the table” and emphasized Buy American policies.

Best of the web

Inside Germany’s effort to wean itself off Putin and Russian natural gas.

And how Russia built influence in Africa, on the cheap.

Meta is a leader in artificial intelligence, but is fearful of misinformation and toxic content.

Top tickers

Here were the most active stock-market tickers as of 6 a.m. Eastern.

Random reads

With LeBron James now the all-time leading scorer in basketball history, his hometown newspaper looked back at his start.

These former sea turtle poachers are now protecters.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton.