US economy smashes expectations with 256,000 jobs created in December

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The US economy created 256,000 jobs in December, smashing expectations and bolstering the case for the Federal Reserve to cut interest rates at a slower pace.

The figure from the Bureau of Labor Statistics on Friday exceeded expectations of economists polled by Reuters of 160,000, and was above the downwardly revised figure of 212,000 positions added in November.

The unemployment rate was 4.1 per cent, compared with 4.2 per cent in November.

The jobs data for December comes amid a sell-off in the global government bond market, fuelled in part by growing expectations that the Fed will reduce interest rates only slightly in 2025.

The central bank in December forecast just two quarter-point rate cuts this year, compared with a projection of four in September, partly because of persistent strength in the jobs market.

President-elect Donald Trump’s plans to cut taxes, impose tariffs and curb immigration have also led the Fed to signal it will be more cautious in 2025.

Jeff Schmid, a top Fed official, said on Thursday that the US central bank was “pretty close” to meeting its objectives on inflation and employment, underscoring expectations that policymakers will refrain from sharp interest rate cuts this year.

The Fed began cutting its main interest rate in September, reducing it by 1 full percentage point by the end of 2024.

At its next meeting later this month, the US central bank is widely expected to keep interest rates steady at its target range between 4.25 per cent and 4.5 per cent.

This is a developing story