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The U.S. economy beat expectations to add 256,000 jobs in December, pushing long-term U.S. Treasury yields to their highest level since 2023 and pushing stocks to their lowest level since Donald Trump’s election victory. .
The figure released by the Bureau of Labor Statistics on Friday was above the consensus estimate of 160,000 jobs polled by economists polled by Reuters and above the downwardly revised 212,000 jobs added in November.
U.S. Treasury yields rose as investors expected the Federal Reserve to slow its rate cuts this year. The futures market has postponed the expected timing of the first quarterly point interest rate cut from June to September, ahead of the release of statistics. The probability of a second interest rate cut this year has fallen from about 60% to about 20%.
Bank of America went further Friday, saying the “gangbusters” jobs report suggests “the rate cut cycle is over.”
The Wall Street bank added that if inflation picks up significantly, “the discussion should shift to raising rates, which could have an impact.” Goldman Sachs also on Friday reduced its forecast for a rate cut in 2025 from a three-quarter point cut to two quarters.
U.S. Treasury yields rose across the board on strong employment data. The yield on the benchmark 10-year Treasury note rose 0.09 percentage points to 4.77%, its highest level since November 2023, but pared its gains slightly by afternoon in New York.
Stocks on Wall Street fell, with the S&P 500 index down 1.6% and the tech-heavy Nasdaq Composite Index down about 1.9%. The S&P 500 fell to its lowest level since the US presidential election on November 5th.
Several of last year’s strong performers fell, including chipmaker Nvidia, which fell more than 3%, and Tesla, which fell 1%. The dollar rose 0.5% against a basket of six other currencies.
“The numbers emphasize that there is no need for the Fed to rush,” said Eric Winograd, chief economist at AllianceBernstein. ” he said.
The bond market is already “stressed,” he added.
Friday’s jobs report was hotly anticipated on both sides of the Atlantic as Treasury markets tumbled, in part due to rising expectations that the Fed would cut interest rates only modestly in 2025.
British Prime Minister Rachel Reeves has come under increasing pressure this week after the government’s borrowing costs soared, leaving it with little room to comply with self-imposed fiscal rules.
UK bond yields rose following the release of US jobs data. The yield on the 10-year Treasury note rose 0.02 points on the day to 4.85%, but remained below the 16-year high of 4.93% hit earlier this week.
The Fed has signaled it will be more cautious in 2025 in response to President Trump’s tax cuts, tariffs and immigration curbs.
In December, the central bank predicted that interest rates would be cut only twice by two quarter points this year, compared to four quarters expected in September, due in part to continued strength in the job market. Ta.
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Federal Reserve official Jeff Schmidt said Thursday that the U.S. central bank is “very close” to meeting its goals on inflation and employment, underscoring expectations that policymakers will refrain from cutting rates significantly this year.
The Fed began lowering its key interest rate in September, cutting interest rates by 1 percentage point by the end of 2024.
The central bank is widely expected to keep interest rates unchanged in its target range of 4.25% to 4.5% at its next meeting later this month.
“I think the Fed feels very good about getting a pass at its next meeting at this point, and clearly it’s important that this kind of strength continues,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income. If so, the Fed will likely get a pass at its next meeting.” In the next few meetings. ”
Friday’s figures showed the unemployment rate was 4.1%, compared with 4.2% in November. These are the last monthly jobs numbers released during Joe Biden’s presidency, during which the U.S. economy added 16.6 million jobs.
An unusually strong labor market has become a hallmark of the economy under Mr. Biden’s watch, defying repeated predictions of a sharp slowdown or looming recession.
But politically, it didn’t help the Biden administration. That’s because those gains were eroded by a surge in inflation that peaked in the summer of 2022, significantly increasing the cost of living for households throughout his term.
