Despite falling employment in the United States, it can be said that the job market remains in good condition. Evidence of this is the drop in unemployment rates and an increase in wages. The Federal Reserve (Fed) likely feels reassured in its belief that there is currently no rush to accelerate the process of easing monetary conditions. The dollar additionally gained after the publication of data from the University of Michigan which indicated an increase in inflation expectations.
In January, the American job market created 143,000 vacancies. Though this is slightly short of the expected 175,000, it is still well above 100,000. Stability is also suggested from the drop in unemployment rate from 4.1% in December to 4% in January. The average hourly wage increased by 0.5% month-to-month.
Employment remains solid, despite being slightly below consensus. It is noteworthy that the previous data for December and November were revised upwards by a total of 100,000. The tight situation is also indicated by rising wages.
It should be remembered that employment information is collected based on surveys conducted among businesses and government institutions. These numbers are compared to the data on the number of unemployment insurance in an annual revision, and then corrected for the previous March – the reference month. A fairly large correction of -0.4% was made this year, which turned out to be significantly smaller than the initial estimates.
In December, the Census Bureau announced a significant revision of the population number, partly due to an unexpected high level of immigration. These changes were included in the calculations of labor force, employment, and unemployment, which come from the household survey. The view of the labor market for the whole year of 2024 remains good, despite the revisions.
Friday’s data should not change the approach of the Fed’s monetary policy. At this moment, the likelihood of another rate cut by the Federal Reserve in the first half of 2025 is low. Any further adjustment will likely occur no earlier than the third quarter. Jerome Powell and other decision-makers will want to exercise caution in easing financing conditions, especially now when there is great uncertainty about Donald Trump’s economic policy. The U.S. central bank still sees less risk in rate cuts being too late than in an premature decision. The risk of inflation surging in the coming months is significant, so a “wait and see” approach should still be current.
After Friday’s Non-farm Payrolls (NFP) data and data from the University of Michigan, the Fed Funds Futures contracts moved the expected first rate cut date for this year. Last Friday, a 25bp cut was priced in for September (previously July). Total cuts for this year were estimated at 36 basis points (previously almost 45bp).
By Łukasz Zembik, Oanda TMS Brokers
Source: https://ceo.com.pl/kurs-dolara-umacnia-sie-dane-nfp-przesuwaja-prognozy-obnizek-stop-51214
