Americans needed some reassuring economic news, and on Friday they received a double dose: First, a blowout jobs report for December, followed by a tacit admission by Chairman Jerome Powell that he had messed up at his December press conference by suggesting the Federal Reserve is on “auto-pilot” on its tightening course.

Markets reacted with a big vote of confidence, sending the Dow Jones average up 3.3% and the Nasdaq 4.3%. The equity rally roared right past continuing political rancor in Washington over a partial government...