The U.S. economy added a much larger-than-expected total of new hires last month, adding more upward pressure to wage inflation and likely stoking a further selloff in U.S. Treasury bonds.
The Bureau of Labor Statistics said 256,000 new jobs were created last month, well ahead Wall Street’s 164,000 forecast and the downwardly revised 212,000 reading from November.
Average hourly earnings in December rose 0.4% from prior-month levels and were up 3.9% on an annual basis, the BLS said. The monthly tally was ahead of Wall Street forecasts while the year-on-year gain lagged them.
The headline unemployment rate slipped to 4.1%, while the labor force participation rate held at 62.5%.
Bond markets have been in a tailspin since late September, with 10-year Treasury note yields rising to the highest levels since April of last year.
U.S. stock futures extended declines following the data release, with the S&P 500 now called 66 points lower, the Nasdaq priced for a 300-point drop and the Dow for a 380-point slump.
Benchmark 10-year Treasury note yields rose 8 basis points to 4.767% following the data release while rate-sensitive 2-year notes jumped 8 basis points to 4.377%.
Related: Jobs report will test Fed interest rate cut plans
Earlier this week, payroll processing group ADP said private sector hiring slowed to around 122,000 last month, with wage gains for those remaining in their positions sliding to the lowest levels since summer 2021.
Other data, however, have been mixed, with the Labor Department’s reading of November job openings rising 259,000 from October levels to a stronger-than-expected tally of 8.01 million.
More Economic Analysis:
Fed interest rate cut bets in 2025 tied to Trump policy wild cardsInflation report adds to interest rate cut bet complexityTrump’s plans will test Fed interest rate cut bets in 2025
Challenger Gray, meanwhile, noted that layoffs in December slowed 33% from November to just under 39,000. The fourth quarter tally of 152,000 was down around 13% from the prior-year period.
“The uneasy equilibrium state in the labor market needs to be carefully watched by policymakers, especially amid the incoming administration’s proposed trade and immigration policies, which may add to labor and input costs for businesses,” said Seema Shah, chief global strategist at Principal Asset Management.
“While labor demand weakness has not translated into widespread job cuts, policymakers must be alert to the risk,” she added.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
