Healthy US December payrolls puts March Fed pivot in doubt
NEW YORK (Reuters) — U.S. employers hired more workers than expected in December while raising wages at a solid clip, casting some doubt on financial market expectations that the Federal Reserve would start cutting interest rates in March.
Nonfarm payrolls increased by 216,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for November was revised lower to show payrolls rising 173,000 instead of 199,000.
The unemployment rate was unchanged at 3.7%.
MARKET REACTION:
STOCKS: U.S. stock futures initially deepened a loss then steadied and were last off 0.11%
BONDS: U.S. Treasury 10-year yield rose to 4.063% after the report. Two-year yields rose to 4.435% FOREX: The dollar index rallied at first then pared to about where it started with a 0.24% gain
FUTURES: contracts that settle to the Fed's policy rate indicated traders see only about a 50% chance of a rate reduction in March, versus the nearly 65% chance seen before the stronger-than-expected jobs data.
COMMENTS:
QUINCY KROSBY, CHIEF GLOBAL STRATEGIST FOR LPL FINANCIAL, CHARLOTTE, NC (emailed note)
“Despite two months of downward revisions in the payroll numbers, this report suggests that with the unemployment rate remaining at 3.7% and hourly wages continuing to surprise to the upside, the economic backdrop is solid and provides a strong cushion for continued consumer spending. The probability of an interest rate cut at the March 20 Fed meeting, which had been over 80% just a couple of weeks ago, has dropped precipitously to below 60% following this morning's payroll print.”
TIM GHRISKEY, SENIOR PORTFOLIO STRATEGIST, INGALLS & SNYDER, NEW YORK
“It's a very favorable jobs report. Non-farm private payrolls, the core
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