December employment: Just right
|Summary
The employment data for December pointed to a resilient U.S. labor market. Nonfarm payrolls rose by 256K in the month, topping consensus expectations by nearly 100K. Over the past three months, nonfarm payroll growth has averaged 170K, a solid pace of hiring that should be fast enough to keep the unemployment rate relatively steady. To that end, the unemployment rate fell by one-tenth to 4.1% and is right in the sweet spot of the Fed's projections for a "not too hot" and "not too cold" labor market. Similarly, wage growth of 3.9% is roughly consistent with an eventual return to the Fed's 2% inflation target after accounting for 2% labor productivity growth seen over the past year.
The FOMC made clear at its December meeting that it would take additional progress on moving inflation back to 2% before future rate cuts materialized, assuming that the labor market remained in a healthy position. Today's employment data should give policymakers more confidence in that assumption. A solid pace of hiring as measured by the nonfarm payrolls figures, when paired with an unemployment rate that has been relatively flat since the summer, likely will push the central bank to be patient with future rate cuts. We still expect the FOMC to cut rates again at some point this year as it searches for the neutral rate, but a rate cut at its meeting on January 29 is off the table, and March looks increasingly unlikely as well.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.