(Reuters) – U.S. job growth unexpectedly accelerated in December while the unemployment rate fell to 4.1% from November’s 4.2% as the labor market ended 2024 on a solid footing, reinforcing the Federal Reserve’s cautious approach to interest rate cuts this year.
Nonfarm payrolls increased by 256,000 jobs last month after rising by a downwardly revised 212,000 in November, the Labor Department said on Friday. Economists polled by Reuters had forecast payrolls advancing by 160,000.
MARKET REACTION:
STOCKS: S&P 500 E-minis extended losses and were down 0.96%, pointing to a weak open on Wall Street
BONDS: The yield on benchmark U.S. 10-year notesjumped to 4.78%, the two-year note yield jumped to 4.362%FOREX: The dollar index turned 0.45% higher and the euro extended a loss to -0.52%
COMMENTS:
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN
“The knee-jerk response to this payrolls report is to suggest the Fed doesn’t need to cut ever again. In fact, why not hike? But the details matter and the gains are still mostly in non-cyclical sectors. Wages aren’t contributing to inflationary pressures. The Fed can afford to wait to cut further, but unless inflation drifts higher there’s no need for the Fed to hike to tamp down inflation.
MICHAEL BROWN, SENIOR RESEARCH STRATEGIST, PEPPERSTONE, LONDON
“I think this will only encourage a continuation of the USD upside that has been the market’s bias for a while, certainly serves to reinforce the US exceptionalism theme, and should keep the Fed relatively hawkish compared to peers in the G10 space.”
“Biggest risk to that USD bullish view would be if participants seek to take profit/trim risk early next week ahead of Trump’s inauguration.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“This report will fuel yields even higher, the labor market is not showing any signs of weakening.”
“This, combined with the unknowns over Trump’s tariff policies, seals the fact that the Fed is going to stay on pause for a longer period than expected.”
“The good news is there’s no increase in wage inflation and the participation rate can’t be blamed on the unemployment rate moving lower.”
“This is a good report for the economy but a headache for the Fed. The Fed’s not going to lower rates any time soon and the pause is likely to continue well into the second quarter.”
“If the labor market continues this way and Trump enacts his tariff policies, we’ve probably seen the end of the easing cycle.”
(Compiled by the Global Finance & Markets Breaking News team)