Synopsis:

CIBC highlights a robust US labor market, with December payrolls significantly exceeding expectations and the unemployment rate ticking lower. Despite this, the Fed is likely to remain focused on inflation and trade policy, staying on hold this month.

Key Points:

1. Labor Market Strength:

   • Nonfarm payrolls rose by 256K in December, far surpassing the 165K consensus.
   • Revisions to the prior two months were minimal, with only a net 8K reduction.
   • The three-month average job gain is now 170K, higher than mid-2024 levels.

2. Wage Growth & Unemployment:

   • Wage growth moderated to 0.3% m/m, aligning with expectations, and fell to 3.9% y/y.
   • The unemployment rate declined to 4.1%, below both consensus and November's 4.2%, with participation steady at 62.5%.

3. Fed Implications:

   • While the labor market remains strong, the Fed's focus has shifted toward inflation sustainability and trade policy developments.
   • The latest data reinforces expectations that the Fed will pause rate adjustments in January.

Conclusion:

The strong jobs report underscores the resilience of the US labor market. However, with the Fed's priorities now centered on inflation and trade policy, today's data supports a decision to hold rates steady this month.