A commentary by Josh Jamner, Investment Strategy Analyst at ClearBridge Investments, on this morning’s Jobs Report.
The strong jobs number shows that the U.S. economy remains on robust footing heading into 2025. Job creation was healthy and the unemployment rate declined, while wage gains remained steady. This should continue to allay fears of downside risks to the labor market which in turn diminishes the case for further interest rate cuts from the Federal Reserve. To that end, the Fed Fund futures market is no longer pricing any cuts in 1H25 after this morning’s data and a January cut is all but off the table.
While bond yields jumped and equities sold off on the release, longer-term this should be a positive development for financial markets. The consumer has been a key component of U.S. exceptionalism over the past several years, and continued growth in aggregate incomes (aggregate weekly payrolls +5% YoY) should help drive solid spending trends in the months to come. In turn, this should boost the outlook for economic growth and corporate profits, offsetting some of the drag from higher discount rates. This may shift market leadership in favor of shorter duration assets such as value equities (relative to growth). Ultimately, today’s jobs data shows that the U.S. economy remains in good shape.
