The U.S. non-farm payroll in December was "hot"! Will the Federal Reserve suspend its interest rate cuts?

A report released by the U.S. Bureau of Labor Statistics on Friday showed that nonfarm payrolls increased by 256,000, significantly exceeding the expected 165,000, with data for the previous two months slightly revised downward. The unemployment rate dropped to 4.1%, and average hourly earnings rose by 0.3% compared to November. The addition of new jobs in December in the United States was the highest since March, and the unexpected decrease in the unemployment rate marked the end of a unexpectedly strong year, providing a reason for the Federal Reserve to pause interest rate cuts. After traders reduced their bets on rate cuts, U.S. bond yields and the dollar soared, while S&P 500 futures fell following the announcement of this news. Friday's report confirmed that despite high borrowing costs, persistent inflation, and political uncertainty, the labor market remained strong last year. Although demand for workers is expected to slow down in 2024 and the unemployment rate is expected to rise, the economy added 2.2 million new jobsless than the 3 million new jobs in 2023, but more than the 2 million new jobs in 2019. Following a recent resurgence in inflation, the Fed's focus has shifted back to inflation, with several officials indicating that after lowering borrowing costs by a full percentage point in 2024, they may maintain interest rates steady for a period of time. The U.S. Bureau of Labor Statistics will release monthly consumer price data on January 15. The increase in employment in December was mainly in the healthcare and social assistance, retail trade, and leisure and hospitality sectors. Government employment also saw an increase, while manufacturing and wholesale trade showed declines. The labor force participation rate (the percentage of the population employed or actively seeking work) remained unchanged at 62.5%. The employment participation rate for workers aged 25-54 (also known as prime-age workers) also remained unchanged. The data also showed a decrease in the number of long-term unemployed individuals, an increase in voluntary quits, and a decrease in the median duration of unemployment. Although weekly unemployment insurance claims data showed that layoffs remained low in 2024, several large companies, including Blackrock and Tyson Foods, have announced plans to lay off workers this year. A report from executive training company Challenger, Gray & Christmas showed that in 2024, the number of job cuts announced by companies was the lowest in nearly a decade. Furthermore, it remains to be seen how President-elect Trump's economic agendaparticularly plans for large-scale deportation of illegal immigrants and imposing punitive tariffs on imported goodswill affect the labor market.