Executive Summary
U.S. payrolls increased by 256,000 in December. Despite downward revisions to the prior two months, the six-month average rose to 164,700, which is a testament to recent strength. Also, the unemployment rate slipped to 4.1%.
We have repeatedly noted that labor market conditions were cooling but not weak. In fact, the headline job growth has been above 200,000 in three of the past four months. Furthermore, wages have remained steady, while hours worked has been steady for the past five months.
Ultimately, this report bolsters the case for the Federal Reserve (Fed) to take a ‘wait & see’ approach to additional rate cuts in the near term, which is in-line with what the Fed projected in December. Of course, fewer rate cuts will most likely disappoint markets. While the overall rate environment is complicated given the sharp rise in interest rates during the past month, we’re still firmly in the “stronger economy is better” camp, even if that translates into fewer rate cuts.
