US employment data has been released: Non-Farm Payrolls and the unemployment rate. How did the markets react?
On Tuesday, December 16, the US Bureau of Labour Statistics (BLS) released data on the labour market. This included figures on Non-Farm Payrolls (NFP), which measure new jobs created excluding the agricultural sector, as well as the unemployment rate. What is the current situation, and how did the markets react to this data and why?
The data: Non-Farm Payrolls and unemployment rate
The survey conducted on December 16 is the second one since the official end of the shutdown, which partially hindered data collection for October. It refers to November. To get straight to the point, the Non-Farm Payroll (NFP) increased by 64,000 jobs, surpassing expectations of 50,000 new jobs. However, the unemployment rate rose to 4.6%, which is 0.2% higher than both forecasts and previous measurements.
The implications
The financial world places significant importance on employment figures, especially after the operational confusion caused by the recent shutdown.
Interest rates are closely linked to the labour market, a key indicator for policymakers. Federal Reserve Chairman Jerome Powell emphasised this shift in priorities during his speech at Jackson Hole. He stated that the US central bank is now focusing more on reducing unemployment than on maintaining price stability when evaluating monetary policy decisions.
Given these developments, investors have been following a logical sequence over the past three months: if the Non-Farm Payrolls (NFP) report falls below expectations and the unemployment rate rises, the Federal Open Market Committee (FOMC) will likely cut interest rates at its next meeting. This expectation was reflected in the outcomes of the most recent monetary policy meeting.
In any case, today’s BLS report on the US labour market painted a worsening picture: the unemployment rate continues to rise month after month and has reached its highest level since 2022.
Forecasts for the December FOMC
The CME Group’s FedWatch is a tool that assesses the likelihood of a rate cut by the Federal Open Market Committee (FOMC) based on Fed Funds futures prices. Currently, it shows a 75.6% probability of no change in rates, with a 24.4% chance of a 25-basis-point cut (0.25%). These percentages are provisional and may change daily; however, they are likely to become less volatile as the meeting date approaches.
How have the markets reacted?
As of this writing, the main Wall Street indices have responded negatively to recent news: the Dow Jones is down 0.5%, and the S&P 500 is down 0.35%. In contrast, the Nasdaq £ remains relatively stable, with a slight 0.03% decline.
The cryptocurrency market is showing an interesting reaction: Bitcoin has risen 1.5% to $87,700, while Ethereum has fallen 0.4% to $2,950. Solana is following Bitcoin’s lead, outperforming Ethereum by a modest 0.3% to $128. The Total Market Cap remains below $3 trillion, currently at $2.95 trillion.
Additionally, the DXY, which measures the dollar’s performance against six major currencies, is down 0.2% from yesterday, following yesterday’s 0.15% decline. Meanwhile, gold prices remain virtually unchanged, with a 0.02% increase, trading at $4,300.
What’s next?
In the coming days, we anticipate significant market volatility, particularly in the cryptocurrency sector. This heightened volatility is largely driven by powerful emotions and sentiments that can rapidly shift billions of dollars in investment capital within just hours. Factors such as macroeconomic news, regulatory developments, and social media trends can trigger swift fluctuations.
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