Key economic data has reshaped expectations for Federal Reserve rate cuts. On December 16 Beijing time, the U.S. Bureau of Labor Statistics released combined October and November nonfarm payroll figures, showing the unemployment rate unexpectedly rose to 4.6% in November - the highest level since September 2021. Analysts suggest this could be a crucial factor prompting further Fed easing.
Following the jobs report, traders priced in two Fed rate cuts for 2026. CME's FedWatch Tool showed the probability of a 25-basis-point January rate cut jumped to 26.6% from 22% pre-release. The dollar index plunged below 98 for the first time since October 6. U.S. stocks opened lower but tech shares led a rebound, with the Nasdaq turning positive.
The report revealed November nonfarm payrolls grew by 64,000, beating expectations of 50,000. However, October employment was revised sharply downward by 105,000 jobs. The labor agency noted it couldn't quantify the government shutdown's impact on October-November data.
Further signs of cooling emerged in revisions: August payrolls were adjusted from -4,000 to -26,000, while September saw a downward revision of 11,000 jobs. Wage growth slowed to 3.5% year-over-year - the weakest pace since May 2021. Separate Commerce Department data showed flat October retail sales, suggesting economic deceleration.
Interest rate futures now imply 58 basis points of easing in 2024. Market participants focused on the unemployment spike and October job losses as potential triggers for Fed dovishness.
The dollar's decline saw the index hit 97.8669 intraday before paring losses. Major indexes closed mixed, with the Dow down 0.62% while the Nasdaq gained 0.23%. Tech stocks broadly advanced, with Tesla surging over 3% to record highs.
Analysts noted the unemployment rate's rise to 4.573% (unrounded) from September's 4.440% warrants Fed attention, though higher labor force participation tempered concerns. Market expectations for policy easing intensified, particularly after August-September data was revised down by 33,000 jobs combined.
Fed Chair Powell recently cautioned about interpreting shutdown-affected data and suggested official figures may have overestimated monthly job growth by up to 60,000 since April - implying potential net job losses.
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