US unemployment rises to 4.2%. Markets confirm expectations of a 25 basis point reduction in the cost of money at the Fed meeting on December 18.
The US economy created 227,000 jobs in November, slightly beating forecasts of 214,000 new payrolls and confirming the solidity maintained by the expansion in the country. The picture of the US economy can confirm a path of cautious reductions in interest rates by the Federal Reserve to support growth. Starting with a cut this month, decreased to a quarter-point, yet for an additional period in a row.
Hourly wages have risen 4 percent over the past year, https://youtu.be/9GrCH2cDG2c?si=3Rj-z7stCPgvO0qPcompared with a forecast of 3.9 percent. Employment has mostly recovered from the impact of two major hurricanes that paralyzed activity in several states in the southeastern part of the union. And from a strike at Boeing that temporarily affected 33,000 workers.
In futures, investors now give an 87% chance of a 25 basis point cut in the cost of money, between 4.25% and 4.50%. At the central bank meeting on December 18, up from 71% previously. However, they then give a 65% chance, up from 59% before the data, of a pause perhaps as early as the January meeting. In general, the expectation is that the Fed may limit further easing interventions next year. If the economy continues to prove resilient. According to futures, a new cut could perhaps be triggered in March, with a 51% probability. At the past two meetings, the Fed first aggressively cut rates by 50 basis points and then by 25 basis points.
US Labour Market
The labour market appears generally headed for a gradual slowdown but at the moment without shocks. A scenario that if it comes true could give credence to the Fed’s controlled strategy. Chairman Jerome Powell in recent days stated that the economy remains solid enough to allow the Fed to act with prudence and not to rush in its maneuver. To find a neutral value for rates, which neither limit nor stimulate growth. Gradualism is the preferred path of the Central Bank.
JP Morgan predicts that the US could create an average of 113,000 paychecks per month next year. Compared to about 180,000 this year, and that unemployment could reach 4.4% by the end of 2025. Although there is no shortage of those who believe, Citigroup analysts, that the cooling of the expansion, and in particular of work, could push. The Fed to cut rates also in January and in subsequent meetings until reaching reference interbank rates between 3% and 3.25%.
One of the big unknowns is political even before it is economic: the commitment of the next Donald Trump administration to stop immigration, especially illegal immigration, and potentially expel millions of people, until now a significant source of job supply. The details of such plans are still ambiguous and so is their impact.
On the safe side, the U.S. government also revised up the weak October figure. Which was plagued by extreme weather and labor unrest, to 36,000 new jobs. Triple the 12,000 originally estimated. In November, the sectors that drove job creation were health care with 54,000 and hospitality with 53,000. Retail lost 28,000 jobs. The transportation segment of manufacturing posted a gain of 32,000 jobs tied to the return to work after the Boeing strikes. government employment increased by 33,000.