The December 2024 US jobs report was released at 8:30 a.m. ET, and showed strong job growth, with nonfarm payrolls increasing by 256,000, significantly beating expectations of 160,000. The unemployment rate fell to 4.1% (non-accumulated 4.0855%), below the expected 4.2%. The labor force participation rate held steady at 62.5%, while the overall U6 unemployment rate decreased to 7.5% from 7.8%. Hourly averages also rose 0.3% month-over-month (in line with expectations) and 3.9% year-over-year, slightly below the 4.0% expected. Private payrolls added 223,000 jobs, well above the 135,000 expected, while manufacturing payrolls declined by 13,000 versus an expected 5,000 gain. Government jobs rose by 33,000. The strong report contrasts with weaker survey data, boosting the US dollar with big gains in currency markets.
US yields moved higher with the yield curve flattening slightly. The 2-year yield rose 12.1 basis points to 4.383%. The 10-year yield rose 8.0 basis points to 4.7613%. The 10-year yield is at its highest level since November 2023. The yield has also risen nearly 120 basis points from 3.60% to a high of 4.788% today. During that time the Fed cut rates by 100 basis points.
Later, the University of Michigan's sentiment index came in at 73.2 down from last 74.0. Over the period when one and five year inflation expectations rose to 3.3% from 2.9% and 3.1% respectively. That added another level of negativity to the US stock market which was already moving lower after the day of mourning for former Pres. Carter.
The main indexes will close significantly lower led by the Russell 2000 which fell -2.22%. The tech-heavy NASDAQ index was also under pressure falling by -317.25 points or -1.63%. The good news is at session lows the index is down -460 points. It could be worse.
The Dow industrial average fell by almost -700 points or -1.63% and the S&P 500 index fell by -91.21 points or -1.54%.
In the forex market, the dollar was mostly higher (it fell against the JPY). An overview of the main currency changes vs the US showing:
- EUR: +0.52%
- JPY: -0.27%
- GBP: +0.78%
- CHF: +0.48%
- CAD: +0.25%
- AUD: +0.84%
- NZD: +0.80%
The AUDUSD fell to its lowest level since April 2020. The NZDUSD fell to its lowest level since October 2022.
The USDs vs CAD gain was moderated (+0.25%) as Canada also released strong employment data with an employment change of 90.9K and the unemployment rate falling to 6.7% from 6.8% in the month of went.
Fed's Goolsbee tried to give a positive response to the market. Goolsbee expressed optimism about labor market stability after the latest jobs report, noting strong private sector hiring while questioning whether it reflects strong consumer activity or a one-off trend. hour.
Speaking on CNBC, he said that the the labor market is not driving inflation, with the inflation rate at 1.9% annually over the past six months. Goolsbee attributed the rise in long-term rates to higher-than-expected growth and a slower pace of Fed rate cuts but expected rates to be significantly lower in 12-18 months if expectations hold. He highlighted recent progress in curbing inflation despite high annual rates reflecting last year's spike and stressed the importance of monitoring productivity numbers.
Meanwhile, Bank of America says it expects no more rate cuts in 2025. Goldman Sachs cut its forecast to a 50 basis point hike in 2025 to -75 basis points.
The probabilities for the end of the year show a 28% chance of no change, a 40% chance of 25 basis points and a 23.5% chance of 50 basis points of cuts.
Next week US CPI data will be scrutinized for a pick-up in inflation. Corporate employment also begins to be released by traditional finance.
