Despite U.S. labor market data that ended strong, RBC says the most recent market data report will lend credence to the idea of mid-year rate cuts in the United States.
This morning, Friday, January 5, 2024, the U.S. Bureau of Labor Statistics released its December report.
“The unemployment rate held at 3.7 percent in December, and the number of unemployed persons was essentially unchanged at 6.3 million,” the report said. These measures are higher than a year earlier, when the jobless rate was 3.5 percent and the number of unemployed persons was 5.7 million.
In a Daily Economic Update from RBC Economic and Thought leaderships economist Claire Fan noted that employment gains came from government jobs, leisure and hospitality and healthcare, which accounted for 65 per cent of the overall payroll employment increase in 2023.
Noting the the unemployment rate rose slightly from 3.4 per cent a year ago to 3.7 per cent at year’s end, Fan says the stage is set for what most expects to happen, to happen.
“Despite a solid December employment report the year has ended with a softer labour market backdrop on balance than it started with,” the economist argued. “The unemployment rate is still low but has ticked higher. The deceleration in wage gains earlier in the year had lost some momentum over the last two months, but that alone is unlikely to be a huge cause of concern as long as inflation readings in the U.S. continue to ease persistently (headline CPI was at 3.1% in November), and output growth to slow. We expect the Fed to continue to observe payroll and inflation data closely, but ultimately expect a softer economic growth backdrop and slowing price pressures to result in rate cuts starting later in the second quarter of this year.”
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