January 10, 2025 (Globalinvestorideas.com Newswire) Globalinvestorideas.com, a go-to platform for big investing ideas releases market commentary from Michael Brown Senior Research Strategist at Pepperstone.
The December US labour market report pointed to the employment backdrop having remained resilient as the year drew to a close.
Headline nonfarm payrolls rose by a blowout +256k last month, well above the forecast range, and a substantial pick-up from the +212k pace seen a month prior, while also representing the biggest 1-month jobs gain since last March.
Meanwhile, unemployment unexpectedly fell back to 4.1%, down 0.1pp from the prior figure, even as labour force participation held steady at 62.5%. Earnings metrics, furthermore, were broadly in line with expectations, as average hourly earnings rose 0.3% MoM, and by 3.9% YoY.
On the whole, the report pointed to the labour market having remained solid as 2024 drew to a close, and hence seems unlikely to be a game-changing one, from a policy perspective.
The FOMC remain on track to ‘skip’ the January meeting, leaving the fed funds rate unchanged, allowing time to examine the impacts of the 100bp of normalisation delivered last year, while also providing a chance to assess upside inflation risks, and the impacts of the early policies implemented by the incoming Trump Administration.
Looking ahead, 2025 is likely to see further steps back towards a more neutral policy stance, albeit said steps will likely be taken at a much slower pace than last year, with the ‘dot plot’ pointing to just two 25bp cuts as a median expectation for the year ahead.
Consequently, with a renewed hawkish risk having now been introduced to the rate path, the ‘policy put’ that has been in place over the last 18 months is set to become considerably less forceful. Hence, the market’s ‘comfort blanket’ – the prospect of deeper, or faster, rate cuts – likely won’t be present to the same extent next year.
Consequently, while strong earnings and economic growth should continue to paint a positive backdrop for risk, and see the path of least resistance still leading to the upside, said path is likely to be somewhat bumpier, and considerably more volatile, than that seen over the last year or so.
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