Mixed news on the job market as the Fed makes its latest move.
Taking a closer look…
- The job market experienced some volatility recently as initial jobless claims ticked higher. Nevertheless, unemployment filings have remained well below long-term averages, which indicates the labor market may have retained some underlying strength.1
- For example, job openings surged to a 5-month high. The latest data shows a notable increase in available positions. This uptick suggests that while hiring has slowed in many industries, demand for skilled employees remains strong in areas such as health care.2
- Following October’s rate cut, the US Federal Reserve (the Fed) delivered another rate reduction on December 10 aimed at supporting economic growth against the overall backdrop of a less robust labor market. By lowering borrowing costs, the Fed hopes to encourage business investment and consumer spending.
- While inflation remains above its 2% target, the Fed appears focused on sustaining employment. This illustrates the Fed's delicate balancing act between managing inflation and the job market.3
- Inflation remains elevated. However, a lot of the recent price pressure stems from tariff-related costs, which may gradually work their way through supply chains. As the effects of tariffs fade, inflation could trend lower.
- The outlook for rate cuts in 2026 remains uncertain, depending on how economic conditions unfold. The path forward is clouded by persistent inflation, uncertainty on jobs and tariffs, and an impending leadership transition at the Fed.4
Bond Research Analyst, Strategic Advisers
"While the US Federal Reserve will welcome a new chair next year, interest rate decisions aren’t made by one person alone. Policy is shaped by 12 voting members, each bringing their own views on inflation, employment, and the path for future interest rate cuts. The chair’s perspective matters, but consensus drives outcomes. The next chair will need to navigate these divergent viewpoints to arrive at a consensus policy rate."
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