Fed seen on longer rate-cut pause after December jobs data

A drop in the unemployment rate may ease concerns at the US central bank about labour market weakness, with traders betting Federal Reserve Chair Jerome Powell has delivered his last interest rate cut before his term ends in May and leaving any further policy easing in the hands of whomever President Donald Trump taps as Powell's successor.

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The unemployment rate fell to 4.4 per cent last month from a revised 4.5 per cent in November, the US Labor Department reported on Friday, even as employers added 50,000 jobs in the month. Economists polled by Reuters had forecast a gain of 60,000.

Powell led the Fed into reducing its benchmark overnight interest rate by three quarters of a percentage point last year in a bid to keep the job market from softening further, even as his more hawkish colleagues argued that doing so could slow or even imperil progress on bringing down above-target inflation. The latest job market data appears to give the central bank a bit of breathing room to leave short-term borrowing costs where they are to keep up the pressure on inflation, as Powell last month signaled policymakers are inclined to do at least in the near term.

December's modest job growth is “very much in line with the businesses I am talking to, which is that the low-hire environment continues,” Richmond Fed President Thomas Barkin told reporters, noting the reluctance to hire is due to uncertainty about the economy and also to higher productivity that allows firms to get by with less labour.