Haitong Securities: Expects the Fed to Pause Rate Cuts from January to May, Then Cut Rates 1-2 Times After New Chair Takes Office

Odaily News Haitong Securities research report stated that US non-farm payrolls increased by 50,000 in December, below the Bloomberg consensus expectation of 70,000, with cumulative downward revisions of 76,000 for October-November. Although the unemployment rate declined, the significant downward revisions for the previous two months brought the three-month average of private sector non-farm payroll additions down to a low of 29,000, and the structure became further "imbalanced." Looking ahead, we maintain the judgment that the job market will gradually improve in the future, while paying attention to the "temperature gap" between economic growth and employment; we expect the Fed to pause rate cuts from January to May, and then cut rates 1-2 times after the new Fed Chair takes office. December's non-farm payroll growth fell short of expectations and was concentrated in a few industries: the employment diffusion index showed a decline in December compared to November. Considering that recent initial jobless claims have mostly been better than expected, layoffs have decreased, and the leading indicator NFIB business hiring intentions have continued to improve, we still expect US non-farm payroll growth to pick up subsequently. Attention should be paid to the "temperature gap" between US economic growth and the job market. From the Fed's perspective, although the employment data is weak, it has not continued to deteriorate. It is expected that the Fed will pause rate cuts at the January meeting, emphasizing the need to observe subsequent data before making decisions. Therefore, it is expected that the Fed will pause rate cuts from January to May, and then cut rates 1-2 times after the new Fed Chair takes office. (Jin10)