The US labour market is expected to have lost further momentum in the first month of the year, as higher borrowing costs from the Federal Reserve damped demand for new hires.

Employers in the world’s largest economy are set to have added 190,000 jobs in January, according to a consensus forecast compiled by Bloomberg, a step down from a 223,000 increase in December. While still a solid pace, a figure in line with estimates would mark the sixth-straight month of slower growth.

The unemployment rate is forecast to have steadied just above its pre-pandemic low, at 3.6 per cent. Average hourly earnings are expected to have edged up another 0.3 per cent since December, which would translate to a 4.3 per cent annual pace.

The data, due to be released by the Bureau of Labor Statistics at 8.30am Eastern Time on Friday, comes as the Federal Reserve debates how much more it needs to tighten monetary policy in order to bring inflation back down to its longstanding 2 per cent target.

The US central bank this week switched back to a more orthodox pace of interest rate increases after a string of big moves last year, lifting the federal funds rate by a quarter of a percentage point to a new target range of 4.50 per cent to 4.75 per cent.

Speaking on Wednesday, Fed chair Jay Powell struck a more optimistic tone about the economic outlook and the central bank’s handle on what has been one of the worst inflation shocks in decades. That ignited speculation the Fed is closer to ending its rate-rising campaign earlier than previously signalled.

Despite acknowledging that the “disinflationary process” had begun, Powell cautioned it was still in the “early stages” and that price pressures remained too intense, especially those linked to what he described as an “extremely tight” labour market.

Underscoring the strength of the labour market, job openings in December jumped again, bringing the total number of vacancies to 11mn. Unemployment claims also fell last week to their lowest level in nine months. Wage growth has ebbed, however, and companies have begun to cut back on labour costs, both by slashing hours and cutting temporary workers from their payrolls.

Powell on Wednesday reiterated that there was still a “path” to bringing inflation under control without a painful economic downturn and excessive job losses, although he did note that a “softening” of the labour market would be necessary.

Most economists polled by Bloomberg expect the US to tip into a recession this year and for the unemployment rate to rise to almost 5 per cent.