A decline in the U.S. unemployment rate is easing Federal Reserve concerns about labour market weakness and reinforcing expectations of a prolonged pause in interest rates.
| Photo Credit:
ELIZABETH FRANTZ/Reuters
A drop in the U.S. unemployment rate may ease concerns at
the Federal Reserve about labor market weakness and build the
case for a longer hold on the policy rate, with traders betting
the central bank will wait until June to resume reductions.
The unemployment rate fell to 4.4% last month from a revised
4.5% in November, the U.S. Labor Department reported Friday,
even as employers added a fewer-than-expected 50,000 jobs in the
month.
The improvement in the jobless rate, even with continued
loss of momentum in monthly job gains, gives the central bank
more breathing room to leave short-term borrowing costs where
they are as it waits for better data on inflation.
U.S. central bankers last year reduced the policy rate by
three quarters of a percentage point in a bid to keep the job
market from softening, even as hawkish U.S. central bankers
argued that doing so could slow or even imperil progress on
bringing down above-target inflation.
Short-term interest rate futures dropped after the jobs
report.
Traders now see just a 45% chance of a rate cut by April,
versus about 50-50 odds before the report, with a June
resumption to rate cuts seen as the far more likely timing.
Published on January 9, 2026
