Investing.com -- The blowout December jobs report on Friday underscored the strength in the economy, putting out any remaining embers of hope for sooner rate cuts, UBS said, cautioning that rate cuts later this year will require a slowing in labor market and inflation data in the months ahead.
"Given the overall strength of the recent economic data, there is little reason for the Fed to consider cutting rates anytime soon," UBS Senior US Economist Brian Rose said in a note.
The nonfarm payrolls report for December showed nonfarm payrolls increased by 256,000, far above consensus expectations of 163,000. The unemployment rate ticked down to 4.1%, returning to June's level, while average hourly earnings rose 0.3% month-over-month, in line with expectations.
The monthly jobs report followed a string of strong labor market including the rise in job openings in November for second-straight month, Rose said. The ratio of job openings to unemployed workers, a key metric for the Fed, is now back near late-2019 levels just before the pandemic.
The signs of ongoing strength in the labor market, however, hasn't forced UBS to ditch its call for two rate cuts in June and September, respectively. But Rose said the base for cuts will "require softer data on both the labor market and inflation in the months ahead."'
A pivot toward rate hikes is "unlikely," UBS believes, characterizing tbe "strong but not overheated."
The hot jobs report comes just days after the Fed's minutes from its December meeting, showed that Fed members believed that the bar for further cuts had risen on concerns about sticky inflation.
After the December meeting, the "Committee would likely slow the pace of further adjustments to the stance of monetary policy," the December meeting minutes showed on Jan. 8.