US employers added a surprisingly strong 256,000 jobs in December — dimming hopes that the Federal Reserve will cut interest rates anytime soon.
The blowout number from the US Bureau of Labor Statistics — a massive jump from the month before as hiring rebounded from strikes and major hurricanes — pushed back traders’ bets for the central bank to cut rates to October versus a previous consensus in June or July, according to Bloomberg.
Economists polled by FactSet had expected payrolls to expand by 153,000 — a drop from November’s 227,000 added jobs — which was revised down to 212,000 on Friday.
The unemployment rate ticked down to 4.1% from 4.2% — though it’s up from the same period the year before, when the unemployment rate was 3.8%. The number of unemployed in the US dropped down slightly to 6.9 million in December.
Stocks slid after the jobs report, with S&P 500 futures about 0.8% lower. Meanwhile, the 10-year Treasury yield ticked up — rising 0.1 percentage points this week.
“Friday’s jobs report showed that hiring ended 2024 very robustly, which is supportive of the higher for longer narrative on interest rates, since the labor market is not being negatively affected by nearly three years of elevated interest rates,” Paul Stanley, chief investment officer at Granite Bay Wealth Management, said in a note.
“The Federal Reserve can afford to be patient in 2025.”
Over the past few months, as inflation showed signs of cooling, the Federal Reserve turned its attention to the unemployment rate as it weighed interest rate cuts.
But the Fed has pushed through a full percentage point of rate cuts in three months and now the exact opposite seems true. Inflation seems to have hit a brick wall while the unemployment rate has stabilized.
The number of people unemployed for 27 weeks or more was little changed at 1.6 million, though this measure is up by 278,000 from a year earlier.
Average hourly earnings on nonfarm payrolls grew 10 cents, or 0.3%, to $35.69.
The retail sector added 43,000 jobs in December as employers hired seasonal staff to handle the holiday shopping surge.
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