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US jobs data a setback, but no game changer

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By Craig Erlam  

The first US jobs report of the year was an early reminder to investors that things don’t always go their way, despite the experience of the last couple of months.

The non-farm payrolls (NFP) jobs report showed a hot labour market with 216,000 jobs added in December, exceeding expectations of 170,000.

The news saw Treasury yields surge to above 4%, while sending stock futures tumbling.

Whether it was just exuberant festive cheer or something more, investors bounced into the end of 2023 full of hope that not only is the tightening cycle behind us, but 2024 will be the year of the soft landing and more rate cuts than you can count on one hand.

That may prove to be correct, perhaps even not bullish enough, but it was going to be tough to sustain that positioning and build upon it early in the new year.

We effectively needed all of the economic indicators to fall kindly from the off which was a big ask.

Early setback

Friday’s data has, along with the FOMC minutes on Wednesday, brought an early setback. But I don’t think either ultimately changes anything as far as the rest of the year is concerned.

The labour market is still slowing gradually and while wages were a little stronger, the broader trend remains very promising.

Perhaps that would explain the response in the markets, with the dollar initially spiking as the jobs report dropped before giving back those gains to trade lower than it did pre-release.

US yields also reversed the initial gains, while gold hit a new high for the day.

None of this suggests traders are suddenly worried.

Craig Erlam is Senior Market Analyst, UK & EMEA at OANDA

Opinions are the author’s, not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.