US Economy Adds 216K Jobs in December, Exceeding Estimates; Markets Anticipate Interest Rate Cuts
According to CoinDesk: The US economy added 216,000 jobs in December 2023, surpassing economists' estimates of 170,000 and going beyond November's revised figure of 173,000. This development is likely to intensify the early 2024 concerns surrounding interest rates.
The unemployment rate remained stable at 3.7%, beating forecasts of a rise to 3.8%. Meanwhile, Bitcoin (BTC) demonstrated a modest decline after the strong labor market report but remained relatively unchanged for the day at $43,900.
Additional data from the report revealed stronger than expected average hourly earnings, which rose by 0.4% in December against estimates of 0.3%. Annually, average hourly earnings saw a 4.1% increase, outpacing the estimated 3.9% and November's 4.0%.
However, traditional markets have had a rocky start to 2024, with indices such as the Nasdaq currently enduring a five-day losing streak. The 10-year Treasury yield, which had dropped by over 120 basis points in Q4 2023 on rate cut hopes, recently experienced a 25 basis point surge, again surpassing 4%.
The overarching concern is that investors potentially went too far in expecting a significant series of rate cuts in 2024. The CME FedWatch Tool suggests roughly a 65% likelihood of a US Federal Reserve rate cut by or before its March meeting, and nearly an 80% chance of 125 basis points or more of rate cuts by the end of 2024.
Although recent economic data – including modestly slowing growth and continued inflation easing – support keeping the Federal Reserve's benchmark funds rate range stable at 5.25%-5.5%, the current figures, including December's job numbers, are far from substantiating a long-lasting and deep series of rate cuts. Consequently, US stock equity futures have turned somewhat lower in response to the report, with the S&P 500 declining 0.2%. Concurrently, the 10-year Treasury yield increased by seven basis points to 4.08%, and the US dollar index rose by 0.25%.