The December 2024 U.S. jobs report was released at 8:30 AM ET, and showed strong job growth, with non-farm payrolls increasing by 256,000, significantly beating expectations of 160,000. The unemployment rate dropped to 4.1% (unrounded 4.0855%), lower than the expected 4.2%. The labor force participation rate held steady at 62.5%, while the broader U6 underemployment rate declined to 7.5% from 7.8%. Average hourly also rose 0.3% month-over-month (matching expectations) and 3.9% year-over-year, slightly below the forecasted 4.0%. Private payrolls added 223,000 jobs, far exceeding the expected 135,000, while manufacturing payrolls declined by 13,000 against an expected 5,000 gain. Government jobs rose by 33,000. The strong report contrasts with weaker survey data, boosting the U.S. dollar with significant gains in currency markets.

The US yields moved higher with the yield curve flattening a bit. The 2-year yield rose 12.1 basis points to 4.383%. The 10-year yield rose 8.0 basis points to 4.7613%. The 10-year yield is at its highest level since November 2023. The yield has also rose by close to 120 basis points from 3.60% to a high of 4.788% today. During that time the Fed cut rates by 100 basis points.

Later, the University of Michigan sentiment index came in and 73.2 down from 74.0 last. Over the when year and five-year inflation expectations both rose to 3.3% from 2.9% and 3.1% respectively. That added another level of negativity to the US stock market which was already moving lower after its day of mourning for former Pres. Carter.

The major indices will close sharply lower led by the Russell 2000 which fell by -2.22%. The tech-heavy NASDAQ index was also under pressure falling by -317.25 points or -1.63%. The good news is at session lows the index is down -460 points. It could’ve been worse.

The Dow industrial average fell by nearly -700 points or -1.63% and the S&P 500 index fell by -91.21 points or -1.54%.

In the forex market, the dollar was mostly higher (it fell versus the JPY). A snapshot of the major currency chan throughges vs the US shows:

• EUR: +0.52%
• JPY: -0.27%
• GBP: + 0.78%
• CHF: +0.48%
• CAD: +0.25%
• AUD: +0.84%
• NZD: +0.80%

The AUDUSD fell to its lowest level since April 2020. The NZDUSD fell to its lowest level since October 2022.

The USDs gain vs the CAD was moderated (+0.25%) as Canada also released strong employment data with the employment change of 90.9K and the unemployment rate falling to 6.7% from 6.8% last month

Fed’s Goolsbee tried to bring positive to the market reaction.Goolsbee expressed optimism about the stability of the employment market following the latest jobs report, noting strong private-sector retail hiring while questioning if it indicates robust consumer activity or a one-off trend.

Speaking on CNBC, he stated that the labor market is not driving inflation, with the inflation rate at 1.9% annualized over the past six months. Goolsbee attributed the rise in long-term rates to higher-than-expected growth and a slower anticipated pace of Fed rate cuts but projected significantly lower rates in 12-18 months if expectations hold. He emphasized recent progress in curbing inflation despite high annual rates reflecting last year’s spike and stressed the importance of monitoring productivity numbers.

Meanwhile Bank of America says that it no longer expect any more rate cuts in 2025. Goldman Sachs trimmed their forecast to raise 50 basis points in 2025 for -75 basis points.

The probabilities for end-of-the-year are showing a 28% chance of no change a 40% chance of 25 basis points in a 23.5% chance of 50 basis points of cuts.

Next week US CPI data will be scrutinized for a pickup in inflation. Corporate earnings also start to be released by the traditional financials.