The US Job Market Shows Signs of Weakening Amid Economic Uncertainty

December brought disappointment to the US labor market, as the number of new jobs was only 50,000 – well below analysts’ forecasts estimating an increase of 70,000. The US Department of Labor confirmed these figures after the federal shutdown ended, also revising the previous month’s number to 56,000. This employment growth trend is clearly weakening, although one positive development broke the pessimism – the unemployment rate fell from 4.6% in November to 4.4% in December, surpassing market expectations.

How Does the Economy Grow Without New Jobs?

The paradox of the current economic situation is revealed in the fact that GDP growth continues despite employment stagnation. Experts attribute this to two main factors: increasing investments in artificial intelligence and price pressure resulting from higher import tariffs. Companies prioritize automation and cost efficiency over workforce expansion. The private sector, which until April this year prevented the growth of new positions, found support mainly in the healthcare sector – the only area adding an additional 21,000 jobs in December.

Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, observes a conservative approach from businesses: “Employers are extending existing employment while avoiding drastic reductions. At the same time, they are not accelerating new hiring. This fully confirms the employment stagnation scenario, which worries the market."

Retail Sector Loses, Healthcare Grows

Retail sales in the United States recorded the largest employment declines – a loss of 25,000 jobs in the last month of the year. Similarly, warehouse stores reduced their staff. In contrast, restaurants, bars, and care services showed an increase in employment. The federal government sector decreased its workforce by 277,000 since January of this year.

Wall Street Breathed a Sigh of Relief

Financial markets reacted opposite to the pessimistic employment data. The S&P 500 reached a new high, rising 0.7% to 6,967.73 points. The Dow Jones Industrial Average soared by 0.5%, while the Nasdaq Composite gained 0.8%. This positive reaction reflects investors’ belief that weak employment data could prompt the Federal Reserve to keep interest rates unchanged at the upcoming meeting, and even consider future cuts.

Stephen Brown from Capital Economics comments: “The unexpected drop in unemployment suggests that the labor market is healthier than previously thought. The Federal Reserve will not rush to cut interest rates again, especially with strong GDP growth in the fourth quarter of the year.”

Gold and Silver Gain on Uncertainty

Precious metals reacted with significant increases amid weaker employment data. Gold rose by 1.4% to $4,511 per troy ounce, achieving a 4% weekly increase. Silver moved even more dramatically – jumped 5% to $79.79 per ounce, with a weekly gain of 9%. The market expected the Fed to keep interest rates steady this month.

The US Dollar Strengthens, Pound Weakens

The US dollar appreciated against the British pound, which fell 0.3% below the 1.34 USD level. At the same time, the dollar reached a yearly high against the Japanese yen, as investors positively assessed the lack of movement by the Supreme Court and the improvement in employment data. Uncertainty surrounding upcoming elections to Japan’s lower house further weighed on the yen.

UK Bonds Rise in Price Amid Rate Cuts

In the UK, government bond yields are heading for the biggest weekly decline in nine months. The yield on 10-year bonds fell from 4.54% to 4.39%, and the 30-year bonds from 5.28% to 5.12%. Investors speculate on further rate cuts by the Bank of England, which should strengthen the competitiveness of the British economy.

European and Asian Indices Support Gold Stocks

FTSE 100 in London closed the week at a new record – 10,124.60 points, supported by news of a potential merger between Glencore and Rio Tinto. Glencore shares rose 9%, then jumped to a 10% increase at the highest level since July 2024. The hypothetical merger could create the world’s largest mining company. Germany’s DAX increased by 0.4%, and France’s CAC 40 gained 0.8%.

In Asia, the Japanese Nikkei 225 soared 1.6% after good results from Fast Retailing (owner of Uniqlo). Meanwhile, the Nasdaq Composite on Wall Street ended Thursday 0.4% lower as investors withdrew capital from tech stocks.

Supreme Court Postpones Decision on Tariffs

The expected “day of liberation” decision by the Supreme Court regarding the legality of the Trump administration’s trade policy did not occur within the anticipated timeframe. Market forecasts give only a 25% chance of confirming the president’s authority to impose extraordinary tariffs. However, Kevin Hassett, Trump’s chief economic advisor, declared that the US has alternative strategies in case of an unfavorable ruling – especially since the economy is experiencing strong growth and moderate inflation.

Consumer Confidence Remains Low Despite Weak Data

Despite concerns about the labor market, the University of Michigan consumer sentiment index increased by 2.1% in January, reaching 54 points. However, this figure remains nearly 25% below the level from a year ago. An interesting detail is the polar divergence – households with lower incomes showed improved sentiment, while wealthier voters are more pessimistic.

Oil Prices Surge Amid Iranian Protests

Demonstrations in Iran caused a significant rise in oil prices. West Texas Intermediate (WTI) jumped 2.8% to $59.36 per barrel, and Brent crude increased 2.4% to $63.46. Trump warned Iran of potential consequences amid protests. Major oil companies responded with gains – Chevron rose 1.2%, ExxonMobil increased 0.5%, BP advanced 2%, and Shell soared about 3%.

Will the Fed Cut Rates This Year?

The market has overestimated expectations for rate cuts by the Federal Reserve. After the release of improved unemployment data, expectations for a January cut almost disappeared. Expectations for two cuts throughout 2025 also decreased, although the second cut is still forecasted for October. Goldman Sachs expects the Fed to keep rates unchanged, while forecasting two cuts in 2026.

Private banks like Berenberg emphasize that the US labor market avoided a “doomsday scenario,” although they expect only one rate cut during the year. Financial institutions note that the earlier increase in unemployment mainly affected teenagers – an anomaly distorting overall data.