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US payroll figures top forecasts

With hourly earnings growth remaining firm, investors are reassessing the likely pace of interest rate cuts this year.

05 January 2024

The US non-farm employment change of 216,000 in December was ahead of expectations of a 168,000 gain. However, the previous two months’ figures were revised down so the net effect is roughly in line with forecasts when looking over a slightly longer view.

The solid jobs growth still does not push the Federal Reserve into moving more quickly on rate cuts and the wage inflation picture will further lead them to hold fire in the short term. Average hourly earnings rose 0.4%, month-on-month and does not show any signs of slowing – these are not the prerequisites for a March rate cut that markets had factored in.

Bond markets that had got ahead of themselves about the pace and timing of cuts are now having to reassess, hence the drift higher in yields across the curve – not an alarming shift but more a modest reversion as this new data gets assimilated.

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Charles Hepworth

Investment Director
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