United States: In a positive turn for the US economy, December saw stronger-than-expected job gains and also somehow a drop in the unemployment rate that’s indeed a good news. According to data from the Bureau of Labor Statistics, 256,000 new jobs were also created last month—well above the 165,000 which are already forecasted by economists and surpassing November’s 212,000.
The unemployment rate also fell to mainly 4.1 percent, down from almost 4.2 percent in November, marking the highest monthly job growth since March 2023.
Adjustments for the unemployment rate in 2024 were even higher demonstrating that the labor market was better than expected. The cycle high for the unemployment rate had initially been 4.3% in July but that figure was revised down to 4.2 percent in Friday’s release.
‘This cannot be disputed as a good report,’ Jefferies US Economist, Thomas Simons said in a note to clients on Friday.
Price pressures were somewhat contained as wages increased 0.3% in December, in line with expectations, and lower than November’s 0.4% rise.
As for wages, end-December increased 3.9% against 4% in end-November, all things considered. At the same time, the labor force participation rate remained unchanged at 62.5%.
The director for nonfarm payrolls Friday shifted investor expectations on when the Federal Reserve will next reduce interest rate based on the strong jobs growth in the US labor market. New traders now believe that there is a less than half a chance of the rate cuts by the FED until June of this year based on the CME Fed Watch Tool. A day before, two of the three investors had expected a reduction in May.
“You are observing this moderate but slightly decelerating labor market situation, which is quite beneficial for Fed,” EY’s lead economist Gregory Daco said in an interview with Yahoo Finance. Actually, I do think that the focus will shift back on inflation prospects through the next 3-month period.
Equities declined after the report, S&P 500 contracts slid as much as 0.9% ailng the Standard & Poor’s 500, Dow Jones Industrial Average and here also Nasdaq Composite indexes. On the other hand, the 10-year Treasury yield (^TNX) which has recently dragged down stock market, rose by roughly 8 points to 4.78%, the highest level since 16 November 2023.
“The issue here now though is if you’re seeking rate cuts based on a deteriorating labour market, well then stop,” Steve Sosnick, chief strategist at Interactive Brokers, said to Yahoo Finance. “It is not going to happen now and this year.”