US economy smashes expectations with 256,000 jobs created in December

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The U.S. economy added 256,000 jobs in December, beating expectations and pushing the yield on long-term U.S. government debt to the highest level since 2023.

The Bureau of Labor Statistics’ figure on Friday beat expectations of 160,000 among economists polled by Reuters and topped a revised downward revision of 212,000 jobs added in November.

Treasury yields rose as investors bet that Federal Reserve this year will be slower to reduce interest rates. Futures markets pushed back the expected timing of the first quarterly rate cut to September, before the data was released.The odds of a second cut this year fell from about 60 percent to 20 percent.

The two-year Treasury yield, which tracks interest rate expectations and moves inversely with bond prices, rose 0.11 percentage point to 4.37 percent.The benchmark 10-year yield rose 0.09 percentage point to 4.77 percent, the highest. level since November 2023.

Stock futures fell, with contracts trailing the S&P 500 by 0.8 percent.The dollar rose 0.4 percent against a basket of six other currencies.

“This number emphasizes that the Fed does not need to rush. . it pretty much confirms that they should be suspended for a few months,” said Eric Winograd, chief economist at AllianceBernstein.

He added that the bond market is already “running out.”

on Friday jobs The data was eagerly awaited on both sides of the Atlantic amid a sell-off in government bond markets, fueled in part by rising expectations that the Fed will cut interest rates only slightly in 2025.

UK Chancellor Rachel Reeves has come under fire pressure this week after the government’s borrowing costs soared, leaving it with little room to meet self-imposed fiscal rules.

UK bond yields rose after the US jobs figures, with the 10-year gilt yield rising to 4.88 percent, up 0.07 percentage points from a 16-year high of 4.93 percent hit earlier this week.

US President-elect Donald Trump’s plans to cut taxes, impose tariffs and curb immigration have also prompted the Fed to signal that it will be more cautious in 2025.

In December, the central bank forecast a rate cut of just two quarter points this year, down from its Sept. 4 forecast, in part because of continued strength in the labor market.

Jeff Schmidt, a senior Fed official, said Thursday that the US central bank was “pretty close” to meeting its inflation and employment targets, underscoring expectations that policymakers will refrain from sharply cutting interest rates this year.

The Fed began cutting its key interest rate in September, lowering it by 1 full percentage point by the end of 2024.

The US central bank is expected to keep interest rates steady in its target range of 4.25-4.5 percent at its next meeting later this month.

Friday’s data showed the unemployment rate was 4.1 percent, up from 4.2 percent in November.