US labour market resilient as traders nervy on interest rate cut bets
The US labour market is still withstanding the pressure of the US Federal Reserve’s interest rate hikes, according to new figures out today, as traders look for hints on the future path of rates.
New applications for unemployment benefit fell to its lowest level since October last week, the US Department for Labor reported today.
There were 202,000 state unemployment claims in the week ending December 30, below economists’ expectations of 216,000 claimants.
“The initial claims data are consistent with labour market conditions that are loosening but not unravelling and still characterized by relatively few layoffs,” Nancy Vanden Houten, lead US economist at Capital Economics said.
Separate data from HR firm ADP showed that businesses added 164,000 new jobs in December, up from 103,000 last month and ahead of the 115,000 expected by economists.
The number of new jobs climbed for the fourth month in a row, led by a “healthy bump” in leisure and hospitality hiring, the report showed.
However, the manufacturing sector continued to struggle in the face of higher interest rates.
Pay growth slowed as well, continuing a deceleration that began in September 2022. The survey showed that pay for job-stayers rose 5.4 per cent in December, down from 5.6 per cent the month before.
“While wages didn’t drive the recent bout of inflation, now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared,” Nela Richardson, chief economist, ADP.
Today’s figures follow the Department of Labor’s Job Openings and Labor Turnover Survey (JOLTS), which was released yesterday.
The survey showed job openings fell to the lowest level since March 2021 at 8.79m. The rate of hires also fell down to 3.5 per cent, the lowest since 2014 apart from the pandemic.
Jim Reid, analyst at Deutsche Bank, said the figures “added to concerns that the labour market was softening”.
Official figures, known as non-farm payrolls, come out tomorrow and analysts hope it will give a clearer picture on the state of the labour market.
The data comes as traders grow increasingly cautious over their bet that interest rates will start falling in the first quarter of this year.
Although it is still viewed as more likely than not, the probability of a rate cut by March was down to 60.4 per cent, according to CME Fedwatch. This was down from 72.8 per cent a week ago.