The economy of the United States smashes expectations with 256,000 jobs created in December

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The US economy created 256,000 jobs in December, smashing expectations and sending the yield on long-term US government debt to the highest level since 2023.

The Bureau of Labor Statistics figure on Friday beat the expectations of economists polled by Reuters of 160,000, and was above the downwardly revised figure of 212,000 positions added in November.

Treasury yields rose as investors bet that the Federal Reserve will be slower to cut interest rates this year. Futures markets pushed back the expected timing of the first quarter rate cut to September from June ahead of the data release. The chance of a second cut this year has dropped to about 20 percent from about 60 percent.

The two-year Treasury yield, which tracks expectations for interest rates and moves inversely to bond prices, rose 0.11 percentage points to 4.37 percent. The benchmark 10-year yield climbed 0.09 percentage points to 4.77 percent — the highest level since November 2023.

Stock futures fell, with contracts trailing the S&P 500 down 0.8 percent. The dollar rose 0.4 percent against a basket of six other currencies.

“This number emphasizes that the Fed does not need to rush. . . validates to a significant degree that they should be waiting for a few months,” said Eric Winograd, chief economist of AllianceBernstein.

He added that the bond market was already “on edge”.

Friday jobs The data was widely anticipated on both sides of the Atlantic amid a sell-off in government bond markets, fueled in part by growing expectations that the Fed will cut interest rates slightly in 2025.

British Chancellor Rachel Reeves has been on the rise pressure this week after the government’s borrowing costs soared, leaving it with little room to meet its self-imposed fiscal rules.

UK bond yields rose after the release of US jobs figures. The 10-year gilt yield rose to 4.88 percent, up 0.07 percentage points on the day, but below the 16-year high of 4.93 percent hit earlier this week.

US President-elect Donald Trump’s plans to cut taxes, impose tariffs and curb immigration have also led the Fed to signal that it will be more cautious in 2025.

The central bank in December predicted only two rate cuts of a quarter point this year, compared with a projection of four in September, partly because of the persistent strength in the labor market.

Jeff Schmid, a senior Fed official, he said Thursday that the US central bank was “close enough” to meeting its targets on inflation and employment, undercutting expectations that policymakers would refrain from sharp interest rate cuts this year .

The Fed began cutting its main interest rate in September, reducing it by a full 1 percentage point by the end of 2024.

At its next meeting later this month, the US central bank is widely expected to keep interest rates steady at its target range of between 4.25 percent and 4.5 percent.

Friday’s figures showed the unemployment rate was 4.1 percent, compared with 4.2 percent in November.