Equity markets and bond prices fell hard after the release of the December jobs report, as the dollar and bond yields surged. However, market moves on January 10 were about more than the jobs report. Anticipation of this week’s forthcoming Consumer Price Index inflation report may also have been a key factor that moved markets. Base effects threaten to make year-on-year total and core consumer inflation rates accelerate in the December CPI report that will be released on January 15. Furthermore, if year-on-year total and core CPI inflation rates accelerate for December, financial markets could face significant turbulence as investors’ expectations for 2025 interest rate cuts fall further.December Jobs Report Impacted Financial Markets Ahead Of Inflation Reports
Equity markets and bond prices fell hard after the December jobs report, as the dollar and bond yields surged. However, the market moves on January 10 were about more than the jobs report.
The strong December 2024 jobs report topped last week’s economic docket. However, other data were also positive—and stronger than expected.
The December ISM Non-Manufacturing Index accelerated to 54.1 from 52.1, reflecting ongoing growth in the services sector. Plus, weekly initial jobless claims fell to a very low 201,000, while the latest JOLTS report from the U.S. Bureau of Labor Statistics reflected an upside surprise, with almost 8.1 million open jobs in November. The only truly weak economic data last week was a decline in November factory orders by 0.4%. The week was otherwise filled with upside surprises for the economy.
As a result of last week’s solid growth data, the latest Atlanta Fed GDPNow shows Q4 2024 GDP likely to be 2.7%, based on data available through January 9, 2025.
Beyond positive growth data, the Federal Reserve released the minutes from the December 2024 meeting of the Federal Open Market Committee, which revealed their concerns about elevated inflation.
While the Fed minutes and solid growth data had already dampened expectations for future Fed rate cuts during the week, the December jobs report effectively drove the probability of a rate cut almost to zero since the unemployment rate fell to 4.1% and payrolls added 256,000 net new jobs in December with only a very modest net downward revision to the previous two payroll figures.
The release of solid jobs and growth data, coupled with policy concerns, moved markets in a big way. However, market mavens, traders, and institutional investors may have also started bracing themselves for December inflation data that will be released this week.
The U.S. unemployment rate fell to 4.1% in December 2024. Payroll gains added 256,000, which was an … [+] acceleration from the revised 212,000 payroll gains in November.U.S. Bureau of Labor Statistics, The Employment Situation – December 2024. Retrieved on January 10, 2025 from https://www.bls.gov/news.release/pdf/empsit.pdf. Prestige Economics. The Futurist Institute.Waiting