U.S. nonfarm payrolls rose by just 50,000 in December, well below the expected 70,000, with downward revisions of 76,000 for the prior two months. This signals weakening momentum in the labor market. Although the unemployment rate edged lower, the three-month average for private sector job gains has dipped to 29,000—the lowest in years.
Sluggish Job Growth and Rising Structural Imbalances
Job creation was concentrated in a narrow set of sectors in December, with the employment diffusion index declining from November. Despite this, initial jobless claims have generally outperformed expectations, layoffs have eased, and the NFIB small business hiring index continues to improve—suggesting underlying resilience and potential for recovery.
- Three-month job growth average hits multi-year low
- Job gains increasingly concentrated in few sectors
- Leading indicators point to gradual labor stabilization
Fed Expected to Hold Steady Until Leadership Transition
Huatai Securities assesses that while labor data is soft, it hasn't deteriorated broadly. The Fed is likely to remain on hold in January, emphasizing data dependence. We expect no rate cuts from January through May.
A policy shift may only come after the new Fed chair assumes office. If inflation remains under control and the economy shows signs of a soft landing, 1–2 rate cuts could follow. Markets should closely monitor the growing divergence between economic growth and labor trends—a key trigger for future monetary easing.