Job creation in the US in December has surprised very much on the rise, according to data published this Friday by the Bureau of Labor Statistics (BLS) of the Department of Labor. The nonfarm payrolls figure, the most commonly observed in the report, was 256,000, well above the 160,000 expected by consensus of economists. Although the November data has been revised downward by 15,000 payrolls (to 212,000), the arrest has fallen one tenth to 4.1% (it was expected to remain at 2%) and the average income per hour accelerate by 3.9% year-on-year (one tenth less than expected), the hot main data has at times agitated the markets, and that is that a labor market that has not just succumbed leaves very little margin the US Federal Reserve to cut interest rates this year. In fact, The markets no longer expect a cut until October of types that right now would be the only one in 2025.
The surprise in the payroll data has been received with a turnaround in Fed rate expectations. After the employment report was released, operators have begun to discount a first rate cut (of 25 basis points, the standard) this year for October, having bet until a few minutes ago on a first drop in June. This path fills the meeting calendar with breaks until the fall. If the swaps They already reflected slightly less than two cuts for 2025 (about 40 basis points), they have now discounted about 30 basis points of decrease. In their December quarterly projections, Fed officials revised their cut forecasts for this fiscal year by four or two. And until March they will not speak again through another dot plot or dot plot. Not so many months ago, the Wall Street media was talking about up to seven declines for the year.
The data “supports the Federal Reserve’s decision to slow the pace of rate cuts and has increased speculation that the easing cycle is now over, further pushing up Treasury yields,” attests Thomas Ryan, analyst at Capital Economics.
Within the balance required by its double mandate (monitoring the inflation and the labor market), the Fed had begun to focus on a notable deterioration in the labor market once the disinflation path seemed solid. However, the supervisor’s attention has returned firmly to inflation after a spike in recent months, and several officials have signaled they could keep rates steady for a while after cutting borrowing costs by 100 basis points since September. . The data of CPI (consumer price index) for December to be published next week.
Every beginning of the month, the official employment report moves the operators needle more than can be expected. Although these are data subject to continuous revisions and whose methodology is often questioned, the assumed impact of each surprise on the figures on the monetary policy developed by the Federal Reserve in the short and medium term usually agitates Wall Street. This Friday, the first reaction to the data was the climb to the gates of the 4.8% 10-year Treasury bond yieldwith the dollar recording gains of over 0.5% against the euro and the pound sterling.
The path of the reference note of the US debt towards 5% does not seem to have an obstacle given the perspectives that are being handled: a Fed that cuts rates less in the face of an economy that remains strong, an inflation that does not ‘want’ to go below 3 %, Donald Trump’s more inflationary policies (tariffs on imports and immigration restrictions), in addition to greater deficits due to the fiscal gifts that the elected president promises and that ‘load’ the yield of the bonds in the part of the term premium.
A strong labor market in 2024
This Friday’s report confirms that the labor market remained strong last year despite high rates (above 5%), persistent inflation and political uncertainty. While demand for workers moderated and the unemployment rate rose in 2024, the economy added 2.2 million jobs, down from an increase of three million in 2023 but above the two million created in 2019.
The advance of payrolls in December was led by the health care and the social assistancehe retail trade and the leisure and the hospitality. Public sector payrolls also advanced. The manufacturing industry and wholesale trade recorded declines. “Private sector payrolls without health care – our preferred measure of underlying employment trends – rose by more than 100,000 jobs for the second straight month, suggesting that the labor market could be gaining momentum after the elections“, they point out from Capital Economics.
The participation rate – the proportion of the population working or looking for work – remained unchanged at 62.5%. The rate for workers ages 25 to 54, also known as prime-age workers, also remained unchanged. The numbers also show that less people lost their jobs permanently and more workers left their jobs voluntarily, while the average duration of unemployment was shorter.
Until this Friday’s surprise in the payrolls, something that was a constant in the end of the pandemic, the latest known data had been confirming the normalization of the labor market. According to the survey JOLTSalso from the Department of Labor, published this week, the vacancies Employment rebounded in November, but not to alarming levels and with other indicators of job offers, such as that of the specialized company Indeed, on the decline. The rate of hiring it barely fell one tenth that month and in a context in which the rate of layoffs remains extremely low. Lastly, the rate of dropouts In the private sector it fell to its lowest level since the peak of the pandemic, which sends a certain message of calm to the Fed due to the wage, and therefore inflationary, pressures that this metric represented during the end of the covid.
In a somewhat more prospective way, the figures for December ISMthe leading indicator of activity prepared by the Institute for Supply Management, referring to employment showed some sluggishness in both the manufacturing and services sectors. In the first case, the index moderated to 45, somewhat below the 50 that separates expansion from contraction. In the second, the mark also fell slightly to something above 50. These are quite low levels that suggest that labor market conditions continue to ease, but do not collapseexplain ING analysts.
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