US economy smashes expectations with 256,000 jobs created in December

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The US economy added 256,000 jobs in December, beating expectations and sending long-term US government debt yields to their highest level since 2023.

Friday’s report from the Bureau of Labor Statistics beat economists’ expectations of 160,000 polled by Reuters and was above a downwardly revised figure of 212,000 positions added in November.

Investors are betting that as Treasury yields climb Federal Reserve Interest rate cuts will be slow this year. Futures markets pushed back the expected timing of the first quarter-point rate cut from June to September ahead of the data release. The chances of a second cut this year have dropped from around 60 percent to around 20 percent.

The two-year Treasury yield, which tracks interest rate expectations and moves against bond prices, rose 0.11 percentage points to 4.37 percent. The benchmark 10-year yield rose 0.09 percentage points to 4.77 percent – the highest level since November 2023.

Stock futures fell, with contracts tracking the S&P 500 down 0.8 percent. The dollar rose 0.4 percent against a basket of six other currencies.

“These numbers emphasize that the Fed does not need to rush. . . It validates to a significant degree that they should hold off for a few months,” said Eric Winograd, chief economist at AllianceBernstein.

He added that the bond market was already “on edge”.

Friday job The data was broadly expected on both sides of the Atlantic amid a sell-off in government bond markets, fueled in part by growing expectations that the Fed will cut interest rates slightly in 2025.

British Chancellor Rachel Reeves continues to rise stress After the government’s borrowing costs rose this week, it left little room to meet its self-imposed fiscal rules.

UK bond yields rose after the release of US jobs figures. The 10-year gilt yield rose to 4.88 percent, up 0.07 percentage points on the day, but down from a 16-year high of 4.93 percent earlier this week.

US President-elect Donald Trump’s plans to cut taxes, impose tariffs and curb immigration have also signaled to the Fed that it will be more cautious in 2025.

The central bank in December forecast just two quarter-point rate cuts this year, compared to a projection of four in September, partly due to continued strength in the job market.

Jeff Schmidt, a top Fed official, said Thursday That the US central bank was “quite close” to meeting its inflation and employment targets, underscoring expectations that policymakers will refrain from sharp interest rate cuts this year.

The Fed began cutting its key interest rate in September, cutting it by 1 full percentage point by the end of 2024.

At its next meeting later this month, the US central bank is widely expected to keep interest rates steady in its target range of between 4.25 percent and 4.5 percent.

Friday’s figures showed the unemployment rate was 4.1 percent, up from 4.2 percent in November.