Payden & Rygel: Notes on today's US economic statistics

Payden & Rygel: Notes on today's US economic statistics

10 januari 2025

Verenigde Staten
Dollar - obligaties (QuinceCreative, Pixabay)

Another solid month of payroll growth continues to suggest the U.S. economy is on track for a marvelous soft landing. 

For 2024, payrolls were up 2.2 million—an average monthly gain of 186k, compared to 3 million in 2023 (251k/month).
The unemployment rate ticked down to 4.1% in December, and the unemployment rate has been either 4.1 or 4.2 for the past 7 months, remarkable stability. Stability like this for the unemployment rate is highly unusual. Normally we see the unemployment rate falling during an expansion, and when it starts to rise, we're in a recession. 
The labor market has cooled somewhat since 2022, so the threat of inflation from labor market conditions has diminished. Case in point: average hourly earnings finished 2024 below 4% year over year and are closing in on pre-Covid 'normal'. Fears of wage-driven inflation should be put aside. 
The tricky part for investors is that since the Fed can be patient, rates could stay more elevated. However, we view this as a great opportunity for carry and coupon clipping for fixed income investors, while the solid jobs data means risk assets will perform well over the course of the year (we're not on the cusp of a downturn).
We still see scope for the Fed to cut rates in 2025 as inflation continues to moderate. 
And remember: the Fed is not trying to derail the labor market, so hikes are not in order here. The Fed wants to foster full employment AND achieve price stability. The cooling in core PCE to 0.1% month to month in November suggests it's possible to have both a solid labor market and on-target inflation.

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