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U.S. job growth jumped unexpectedly last month, suggesting the world’s largest economy isn’t ready to give up its claim to being “the envy of world “.
Here are three things we learned from the latest numbers.
1. The US economy is stronger than expected
For years, concerns have been raised about a possible slowdown in the world’s largest economy.
It has consistently proven the skeptics wrong and last month was no exception.
Job creation in December was well above the expectations of some 160,000 analysts: employers created 256,000 jobs and the unemployment rate fell from 4.2% in November to 4.1%, the ministry said. of Labor.
In total, 2.2 million jobs were created last year, an average of 186,000 per month.
This is a slowdown from the previous year, but still a pretty healthy number.
The average hourly wage rose 3.9% last month compared to December 2023. That’s a solid gain, but not so much as to worry analysts that rapid wage growth will lead to a sudden acceleration in price increases.
Nathaniel Casey, an investment strategist at wealth management firm Evelyn Partners, called it “the goldilocks of job market publications.”
2. There could be fewer interest rate cuts
The US central bank, responsible for maintaining price and employment stability, lowered interest rates in September for the first time in more than four years, saying it wanted to avoid signs of weakness in the labor market.
That boosted the hopes of many would-be borrowers in the United States, who were facing the highest borrowing costs in about two decades and were eager to see them come down.
But the strength of this month’s data suggests that fears about the jobs market may have been premature, removing pressure on the bank to act.
Interest rates on 10- and 30-year U.S. government debt jumped after the report’s release, with the latter exceeding 5%.
Investors had already backed away from betting on cuts this year, worried about signs that the bank’s progress in stabilizing prices was stalling.
There are also risks that policies pushed by President-elect Donald Trump, such as border taxes and migrant expulsions, could raise prices or wages, putting pressure on inflation.
Even though inflation data due next week shows a cooling in inflation – the rate of price increases – Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, said the inflation data employment mean she doesn’t expect the Fed to “cut rates in the near future.” “
3. Higher U.S. borrowing costs also mean higher global rates
Interest rates set by the US central bank have a strong influence on borrowing costs for many loans – and not just in the US.
Global borrowing costs have risen in recent months, meeting expectations that U.S. interest rates are likely to remain high for longer.
In the United Kingdom, for example, the interest rate, or yield, on 30-year government debt hit its highest level in more than 25 years earlier this week, putting pressure on the government as it attempts to develop spending and borrowing plans.
Although the latest US employment figures could be good news for the US economy and its dollar, Seema Shah, chief global strategist at Principal Asset Management, warned that they would be “painful news for global bond markets, particularly UK gilts’, referring to the name of government or debt bonds.
“Peaking yields has not yet been reached, suggesting additional stress that several markets, notably the UK, can ill afford,” she said.
