Last Friday (December 6th), before the US stock market opened, the employment situation report released by the US Bureau of Labor Statistics showed that the non farm payroll rebounded significantly in November, stronger than market expectations, and the unemployment rate rose as scheduled to 4.2%.
Specific data shows that the seasonally adjusted non farm payroll in the United States increased by 227000 in November, the largest increase since April and higher than market expectations of 200000. The October data was revised up from 12000 to 36000.
The data also shows that the US unemployment rate rose by 0.1 percentage points to 4.2% in November, consistent with expectations, reaching a new high since August, with 7.1 million unemployed people. These data are higher than a year ago when the unemployment rate was 3.7% and the number of unemployed people was 6.3 million.
Guosheng Macro, CITIC Securities, China Merchants Macro, and others have all announced that they expect the Federal Reserve to cut interest rates in December.
Guosheng Macro Review stated that with the effect of interest rate cuts becoming apparent, businesses and residents completing deleveraging, and the credit environment returning to loose, the US economy is likely to confirm a soft landing in 2025 and is expected to bottom out and rebound in the second half of the year. At the same time, due to the possible rebound of housing inflation, wage price spiral, and the impact of tariffs, the United States will face the risk of secondary inflation. In this context, it is expected that the Federal Reserve will cut interest rates by 25bp in December and then intermittently cut interest rates by 50bp in the first half of 2025; If the US economy starts to recover in the second half of the year, interest rate cuts may be temporarily halted.
CITIC Securities believes that the unemployment rate is approaching a high level in recent years, and there is still a possibility of a rate cut in December. In November 2024, the number of new non farm payroll jobs in the United States significantly increased, which may be attributed to the temporary disruptions such as hurricanes and strikes that subsided in October. However, it is worth noting that the unemployment rate rose to 4.246% in November, approaching the highest point of the year at 4.253% in July, and the number of unemployed for 15 weeks or more also maintained an upward trend. Against the backdrop of a slight decrease in labor force participation rate and unchanged average working hours, the month on month growth rate of average hourly wages has also declined, reflecting a decrease in the prosperity of both labor supply and demand. Considering the recent statement by Federal Reserve Chairman Powell that monetary policy will be determined by economic trends, there is still a possibility for the Fed to cut interest rates in December against the backdrop of a marginal increase in unemployment.
China Merchants Macro believes that as the impact of events such as hurricane weather and the Boeing strike subsides, the significant rebound in US non farm payroll data in November is basically in line with market expectations. The rebound in unemployment rate will certainly help the December interest rate cut boots land, but the key lies in the statement of monetary policy for 2025 at the December interest rate meeting. If this meeting steps on the brake for subsequent interest rate cuts, it is likely to have a certain negative impact on overseas assets.
Huatai Macro also believes that the November US non farm payroll data shows that the US job market is still in the process of rebalancing, and the Federal Reserve is likely to cut interest rates in December. However, there is uncertainty about the path of interest rate cuts in 2025, which may be affected by tariffs.
For the pace of interest rate cuts by the Federal Reserve in 2025, the Minsheng Macro team predicts that the probability of the Fed suspending interest rate cuts in the second half of 2025 will increase. The unemployment rate remains low, coupled with the obstruction of downward inflation, the Federal Reserve may cut interest rates 2-3 times next year and suspend interest rate cuts in the second half of the year.