Strong job gains push back rate cut

ICYMI: The @BLS_gov employment situation report for December showed continued low unemployment at 4.1% and job gains across a variety of industries. 📈 Here are some highlights. pic.twitter.com/1nSMOlcJiJ

— U.S. Department of Labor (@USDOL) January 11, 2025

The US economy added 256,000 jobs in December, far exceeding economists’ expectations of 165,000 and surpassing the 212,000 jobs added in November. The unemployment rate also fell to 4.1% from 4.2% in November, marking the strongest monthly job gains since March 2023. Revisions to the unemployment rate in 2024 revealed that the labor market was stronger than initially thought, with the cycle high revised down to 4.2%. Jefferies US economist Thomas Simons commented, “There is no denying that this is a strong report.”

The economy added 256,000 jobs in December with job gains in health care, retail and government. Check out the highlights from the latest @BLS_gov report. pic.twitter.com/rBK0VhMxDA

— U.S. Department of Labor (@USDOL) January 10, 2025

A strong jobs report. 256,000 jobs added. Unemployment rate ticks down to 4.1%. Participation rate and hours stable while prime age employment up. And slow nominal wage growth will be reassuring to the Fed. Some of this may be bounce back from strikes, hurricanes, etc. pic.twitter.com/b8Ncd8JQSr

— Jason Furman (@jasonfurman) January 10, 2025

Wage growth, a key indicator of inflation pressures, rose 0.3% in December, aligning with economists’ expectations but lower than the 0.4% seen in November. Year-over-year, wages increased by 3.9% in December, down from 4% in November. The labor force participation rate remained steady at 62.5%.

More jobs. Lower unemployment. President Biden and his administration delivered so many successes for American workers—and we must find common ground to build on it!https://t.co/bKe52hBAWj

— Randi Weingarten 🇺🇸💪🏿👩‍🎓🟣 (@rweingarten) January 10, 2025

The robust US labor market data presented in Friday’s report pushed back investor expectations for the Federal Reserve’s next interest rate cut. Traders now see less than a 50% probability of a rate cut until June, whereas a day earlier, investors had anticipated a cut in May. EY chief economist Gregory Daco remarked, “You’re seeing this steady but slightly cooling labor market trend, which is very encouraging from a Fed perspective. I think the attention will actually pivot back towards inflation developments over the course of the next three months.” Following the report, stocks declined, with futures tied to all three major averages down nearly 1%.

Strong labor market delays rate cut

The 10-year Treasury yield rose about 8 basis points to reach 4.78%, its highest level since November 2023. Steve Sosnick, chief strategist at Interactive Brokers, stated, “The problem here now is if you’re looking for rate cuts based on a weakening labor market … stop looking for those. It’s not going to happen in the immediate term.” Despite the impressive job growth, several major companies have announced layoffs and job cuts for 2025. Big tech firms like Google, IBM, Tesla, TikTok, Snap, and Dropbox implemented job cuts in 2024, leveraging the rising capabilities of artificial intelligence (AI). Other companies, including an unspecified company, an investment company, Bridgewater, The Washington Post, and an online banking and finance company, have also announced staff reductions. While AI is partially responsible for the job cuts, opportunities still exist for workers with the right skills. Job gains were concentrated in non-cyclical industries such as healthcare, which added 46,000 jobs, and the retail and leisure/hospitality sectors, which added 43,000 jobs each last month. In conclusion, the US labor market finished 2024 on a high note, with strong job growth and falling unemployment. However, the strength of opportunity varies by industry, particularly for knowledge workers in tech and finance, as the job growth picture evolves in 2025.