UBS’s Rose: Little purpose for Fed to chop after blowout December jobs report

Investing.com — The blowout December jobs report on Friday underscored the energy within the economic system, placing out any remaining embers of hope for sooner fee cuts, UBS mentioned, cautioning that fee cuts later this yr will require a slowing in labor market and inflation knowledge in the months forward.

“Given the total energy of the latest financial knowledge, there may be little purpose for the Fed to take into account slicing charges anytime quickly,” UBS Senior US Economist Brian Rose mentioned in a word.

The nonfarm payrolls report for December confirmed nonfarm payrolls elevated by 256,000, far above consensus expectations of 163,000. The unemployment fee ticked all the way down to 4.1%, returning to June’s stage, whereas common hourly earnings rose 0.3% month-over-month, according to expectations.

The month-to-month jobs report adopted a string of sturdy labor market together with the rise in job openings in November for second-straight month, Rose mentioned. The ratio of job openings to unemployed employees, a key metric for the Fed, is now again close to late-2019 ranges simply earlier than the pandemic.

The indicators of ongoing energy within the labor market, nonetheless, hasn’t compelled UBS to ditch its name for 2 fee cuts in June and September, respectively. However Rose mentioned the bottom for cuts will “require softer knowledge on each the labor market and inflation within the months forward.”‘

A pivot towards fee hikes is “unlikely,” UBS believes, characterizing tbe “sturdy however not overheated.”

The new jobs report comes simply days after the Fed’s minutes from its December assembly, confirmed that Fed members believed that the bar for additional cuts had risen on considerations about sticky inflation. 

After the December assembly, the “Committee would doubtless sluggish the tempo of additional changes to the stance of financial coverage,” the December assembly minutes confirmed on Jan. 8.