The U.S. unemployment rate fell to 4.4% in December, according to the U.S. Labor Department, easing concerns at the Federal Reserve about potential labor market weakness. Employers added 50,000 jobs during the month, while economists had forecast a gain of 60,000. The latest figures may suggest the central bank has room to maintain current borrowing costs and continue its focus on curbing inflation.
Richmond Fed President Thomas Barkin noted that modest job growth aligns with reports from businesses experiencing a low-hire environment due to economic uncertainty and increased productivity. Atlanta Fed President Raphael Bostic emphasized the need for a continued focus on inflation, which he says remains too high. Both Bostic and Barkin are on the hawkish side of the Fed’s policy spectrum.
Traders are adjusting their expectations, now seeing a 44% chance of a rate cut by April, compared to previous expectations of even odds. A rate cut in June is now seen as the more likely scenario. Olu Sonola, head of U.S. economic research at Fitch Ratings, stated that the drop in the jobless rate should reduce the Fed’s recent urgency to backstop a weakening labor market.
Federal Reserve Chair Jerome Powell’s term ends on May 15. President Trump, who has criticised Powell for not implementing large rate cuts, has stated he has chosen a successor who supports further reductions in borrowing costs, with an announcement expected this month. The Federal Reserve System is the central bank of the United States. It conducts the nation’s monetary policy, supervises and regulates banking institutions and maintains the stability of the financial system.
