US Bureau of Labor Statistics monthly employment report

Odds of December 18 Fed Rate Cut Surge to 85% as Payrolls Rise by 227,000

Dec 6, 2024, 01:40 PM

After the release of the November US employment report, traders have increased their bets on a Federal Reserve interest rate cut at the upcoming December 18th FOMC meeting. Non-farm payrolls rose by 227,000, surpassing the expected 220,000, and the previous month's figure was revised upward from 12,000 to 36,000. The unemployment rate held steady at 4.2%, while the broader U6 rate climbed to 7.9%. Wage growth showed signs of acceleration, with average hourly earnings increasing by 0.4% month-over-month and 4.0% year-over-year. Employment gains were driven by leisure and hospitality adding 53,000 jobs. Following the jobs report, the probability of a rate cut at the December meeting surged, with traders now seeing an 85% to 91% chance of a rate reduction, up from 67% before the report. Market expectations for a 50 basis point cut also increased, with odds rising from 53% to 68%. Short-term interest rate futures jumped, and US Treasuries rallied as traders priced in a higher likelihood of monetary easing.