The US labor market isn’t showing signs of weakness that would prompt another interest rate cut from the Federal Reserve in the near term.
The January jobs report released on Friday showed continued signs of resilience in the labor market as the unemployment rate unexpectedly fell, wages grew more than expected, and December’s monthly job gains were revised higher to show the US labor market exited 2024 on an even better footing than previously reported.
Read more: How does the labor market affect inflation?
The unemployment rate fell to 4%, its lowest level in eight months, while wages increased 0.5% month over month, higher than the 0.3% seen in the prior month. Payroll revisions also showed that the US economy added 100,000 more jobs than initially thought in December and November combined.
The Fed has kept interest rates high to try to bring inflation down to its 2% target. The second part of its mandate, though, is full employment. The central bank must make sure rates aren’t too restrictive in a job market that is rapidly deteriorating. So far that doesn’t appear to be the case.
“The broader picture is still one of labor market resilience and sustained wage pressures,” Seema Shah, Principal Asset Management chief global strategist, wrote in a note to clients on Friday. “This simply gives the Fed little reason to cut policy rates immediately.”
The Federal Reserve’s most recent Summary of Economic Projections (SEP) from December projected two interest rate…
