© Reuters. U.S. non-farm employment growth in December exceeded expectations!Can the Fed cut interest rates as scheduled in March?
Zhitong Finance APP has learned that U.S. employers hired more people than expected in December, while wages rose strongly, calling into question financial market expectations that the Federal Reserve will start cutting interest rates in March. The latest data released by the U.S. Bureau of Labor Statistics showed that 216,000 new non-farm jobs were added in December. The market expected a value of 170,000. The previous value was revised down to 173,000.
The U.S. unemployment rate remained unchanged at 3.7% in December, compared with expectations of 3.8%. The labor force participation rate rose to 62.5% from the previous value of 62.8%, and the employment-to-population ratio fell to 60.1% simultaneously. Average hourly earnings, a key indicator for inflation, increased 0.4% month-on-month to $34.27, a year-on-year increase of 4.1%.
Chances of Fed rate cut in March reduced
After the release of the non-farm payrolls data, the CME Fed Watch Tool showed that the market expected the Federal Reserve to basically stay on hold at its January meeting, with a 56% probability of a 25 basis point interest rate cut in March. Before the employment data was stronger than expected, the probability of a rate cut was close to 65%. .
Traders also downgraded their views on how much the Federal Reserve will cut interest rates this year, now expecting the policy rate, currently in the 5.25%-5.5% range, to end the year just above 4%. They earlier priced the year-end policy rate at below 4%.
Lindsay Rosner, head of fixed income multi-sector investing at Goldman Sachs Asset Management, said, “With a mild winter (so far) and employment data typically boosted by seasonal hiring, we expect a strong, better-than-expected The data, that’s what happened. This number does question the market’s confidence in a rate cut in March. We have had three signs of inflation between now and the March meeting. Every number is important.”
Quincy Krosby, chief global strategist at LPL FINANCIAL, said, “Despite two consecutive months of downward revisions to employment data, this report shows that as the unemployment rate remains at 3.7% and hourly wages continue to rise unexpectedly, the economic background is solid and This provides a strong cushion for continued consumer spending. The likelihood of a rate cut at the March 20 Fed meeting, which was above 80% just a few weeks ago, has dropped sharply to 60% after this morning’s jobs data. the following.”
Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, believes that “this is a very favorable employment report. The core measure of employment-non-agricultural private sector employment is much higher than expected. The previous data has been revised down, but for This is still a very strong number for December.
“This suggests that despite rising interest rates, the economy continues to percolate, which is a very supportive environment for businesses… When the Fed does cut rates, that should help the employment situation even more.
Adam Button, chief foreign exchange analyst at Forexlive, said, “This is obviously a strong report… The market has sniffed out a strong employment report in the past few days, so the market reaction may not be as strong as expected.” Regarding the data On its own, the revised figures take some of the luster out of the overall figure of… It’s more of a hodgepodge than it first appears. “
“Overall, I think the market is a little ahead of itself, but you look at the pricing, we’ve lowered March (rate cut expectations) from 68% to 55%, which sounds about right.” I called March and said, We each had half of the meeting, and I was wondering if we could stay a little longer while the data came out. “
“Inflation data will look very good by about June, but to ask for that in March is aggressive. If the data starts to improve, I don’t think the Fed will hesitate, and I think they’ve made that clear now, but it’s A jobs report — is it a game-changer? I don’t think it’s a game-changer.”
The sell-off in U.S. stocks this week is a normal reaction
The U.S. stock market was sluggish at the beginning of the year, with the Nasdaq recording its largest one-day decline since the end of October 2023 on the first trading day.
Traders believe the sell-off experienced by U.S. stocks this week is a normal response to the strong rebound in the last eight to 10 weeks of last year. Investors, including retail investors, hedge funds and mutual funds, made huge profits in the stock market in 2023. In order to delay the recording date of accrued tax income, they waited until this year to sell stocks.
Ghriskey said, “There has been some correction (in the stock market), which is not completely unexpected given the strength of the market in 2023 and even into the end of the year. There was some immediate profit-taking in the first week of the new year, which I expected This situation won’t last long.
2024-01-06 01:40:00
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