The US economy continues to produce more jobs despite being close to full employment. The unemployment rate has remained at or under 4% since April 2018 and the underemployment rate has been falling in trend terms. The latest employment report indicates the US economy is still producing jobs but not all the figures have been interpreted positively.
According to the US Bureau of Labor Statistics, the US economy created an additional 145,000 jobs in the non-farm sector in December, less than November’s revised increase of 256,000 and less than the 160,000 increase which had been expected. Employment figures for October and November were revised down by a total of 14,000.
December’s unemployment rate remained at November’s rate of 3.5%. The total number of unemployed decreased by 58,000 to 5.753 million while the total number of people who are either employed or looking for work fell by 211,000 to 164.556 million.
US Treasury yields finished lower on the day. By the close of business, 2-year Treasury yields had slipped 1bp to 1.57%, the 10-year yield had lost 4bps to 1.82% and 30-year yields had shed 5bps to 2.28%.
In terms of likely US monetary policy, according to federal funds futures contracts the probability of a rate cut in the March quarter of 2020 remained slim. The implied likelihood of a 25bps cut at the January meeting of the FOMC remained unchanged at zero while a move in March is also viewed as highly unlikely at just under 4%.