The U.S. Department of Labor released an employment report on Friday (January 10th), showing a significant increase of 256,000 nonfarm payroll jobs in December 2024, far exceeding expectations. This could dampen the Federal Reserve’s eagerness to cut interest rates in 2025. The market anticipates that the Fed may choose to keep rates unchanged at the January meeting.
According to the data from the Bureau of Labor Statistics of the Department of Labor, the addition of nonfarm payroll jobs in December (256,000) not only surpassed the 212,000 in November but also significantly exceeded the Dow Jones forecast of 155,000.
The unemployment rate in December dropped to 4.1%, 0.1 percentage point lower than expected.
Examining specific industries, the healthcare sector led job growth with an addition of 46,000 nonfarm payroll jobs in December; the retail industry, which had reduced jobs by 29,000 in November, added 43,000 jobs in December. Other areas that experienced significant employment growth included leisure and hospitality (43,000), government (33,000), and social assistance (23,000).
Employment in sectors such as mining, quarrying, oil and gas extraction, construction, manufacturing, transportation, and warehousing remained relatively stable with little change.
The Bureau of Labor Statistics also revised upward the number of new nonfarm payroll jobs in October by 7,000 to 43,000 and decreased the figure for November by 15,000 to 212,000.
As an indicator of inflation, average hourly earnings increased by 0.3% from the previous month to $35.69 in December, in line with expectations. On a yearly basis, they rose by 3.9%, slightly lower than anticipated. The average weekly work hours for workers remained steady at 34.3 hours.
According to CNBC, the market expects the Federal Reserve to maintain the interest rate at the upcoming monetary policy meeting this month. Central bank officials have expressed concerns about the pace of controlling inflation as it remains above the Fed’s 2% target, mainly due to persistently high housing costs and some commodity prices.
Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, commented on the latest employment report from the Department of Labor, stating, “In the chaotic world of financial markets, it’s good news for job seekers and bad news for the stock market.”
“The better-than-expected job additions immediately triggered reactions in stocks and bonds, leading to price declines (bond yields rise as yields are inversely related to prices), giving the Federal Reserve fewer reasons to cut rates this year,” Zaccarelli said. “Although stocks don’t necessarily need lower rates to rise, lower rates are a tailwind for equities.”
Seema Shah, Chief Global Strategist at Principal Asset Management, told Reuters in an email that “this crucial nonfarm payroll data is good news for the U.S. economy and the dollar, but unfavorable for the stock market seeking rate cuts, and punitive for the global bond market.”
“The robust U.S. labor market is evidently a continuing theme, indicating ongoing economic growth. The Fed can easily keep rates unchanged in January,” Shah said.