US Labor Market Exits 2024 With Strong Job Gains, Drop in Unemployment Rate

• U.S. job growth unexpectedly accelerated in December, while the unemployment rate fell to 4.1%. Consequently, the labour market ended the year on a solid footing, reinforcing views that the Federal Reserve would keep interest rates unchanged this month.
• The Labor Department's closely watched employment report on Friday, January 10, 2025, also showed a decline last month in the number of people who have permanently lost their jobs and a shortening in the median duration of unemployment.
• The upbeat report supported the U.S. central bank's cautious stance toward further monetary policy easing this year amid mounting fears that pledges by President-elect Donald Trump to impose or massively raise tariffs on imports and deport millions of undocumented immigrants could stoke inflation.
• Those worries were evident in Minutes of the Fed's Dec. 17-18 policy meeting published on Wednesday, which noted "most participants remarked that ... the Committee could take a careful approach in considering" further cuts.
• Given these factors, financial markets overwhelmingly expect the Fed to keep its benchmark overnight interest rate unchanged in the 4.25%-4.50% range at its Jan. 28-29 meeting, CME's FedWatch tool showed. The central bank has lowered its policy rate by 100 basis points since launching its easing cycle in September. Furthermore, economists do not expect rate cuts in the first half of this year.
• Last month, the Fed projected only two quarter-point rate cuts this year compared to the four it had forecasted in September, acknowledging the economy's endurance and still-elevated inflation. The policy rate was hiked by 5.25 percentage points in 2022 and 2023.

(Source: Reuters)