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10 Dec 2024 | 3 minutes to read
The US Bureau of Labour Statistics released the latest Job Openings and Labor Turnover Survey (JOLTS) last week, with the report indicating that job openings had risen to 7.74 million, beating market expectations of 7.48 million. Additionally, Non-Farm Payrolls continued to highlight the strength of the US labour market as it showed 227,000 jobs being added to the economy, above analysts’ estimates of 200,000. The reading represents a notable recovery from October, which was heavily impacted by the strikes at Boeing and the disruption caused by hurricanes Helene and Milton. The US unemployment rate rose slightly from 4.1% to 4.2%, but this was line with market expectations and remains low by historic standards. Despite the resilience of the US labour market, futures markets are currently pricing in an 86% chance of the Federal Reserve (the Fed) cutting rates by 0.25% at their final meeting of 2024 on 18 December.
Fed Chairman, Jerome Powell reiterated that the strength of the US economy has allowed the central bank to be a ‘little more cautious’ when it comes to cutting interest rates. In an interview at the New York Times DealBook Summit last week, Powell also addressed the issue of the Fed’s independence, given the concern in some quarters that President-elect, Donald Trump, could undermine this during his second term in office. Despite, Trump frequently criticising the Fed, Powell mentioned that he expects the same kind of institutional relationship between the Fed and Republican administration in Trump’s first term. Powell stated that the Fed was not a ‘creature of Congress’ and that it was more a ‘creature of statute’, which allows them to make decisions for the ‘benefit of all Americans and not for any political party or outcome’.
French President, Emmanuel Macron, lost his third Prime Minister of 2024 last week, following an historic no-confidence vote after a stand-off over an austerity budget. An unusual alliance between far left (New Popular Front alliance) and far right (National Rally) parties managed to oust the minority government of Prime Minster Michel Barnier, forcing him to step down. Barnier had only been Prime Minster for three months, and his government has now gained the unwanted accolade of being the shortest-lived administration in the history of France’s Fifth Republic, which began in 1958.
Emmanuel Macron is now under huge pressure to form a government capable of passing a budget for next year, and avoid any further no-confidence votes, in a bid to prevent France falling further into political turmoil. On 5 December, Macron stated on prime-time television, that he was going to appoint a successor during the coming week. The current deadlock in the French assembly is set to continue, however, as new legislative elections cannot be called until July 2025. Financial markets have remained relatively calm thus far, with modest movements in the French government borrowing rate, the French stock market and the Euro.
The Organisation for Economic Co-operation and Development (OECD) released its biannual report Economic Outlook last week, updating its global growth predictions heading into 2025. The report summarised that the global economy has remained resilient over 2024, despite some notable deviation in the strength of activity across geographical regions and sectors. The major issues prevailing at the start of the year have eased, with inflation falling back to central bank targets in most economies, and labour market tightness alleviating. Nonetheless, some key risks to the global growth outlook very much remain in place, such as heightened geopolitical tensions, which risk further disrupting energy markets and supply chains and fostering a more fragmented and protectionist global trading environment.
The OECD is forecasting global GDP growth of 3.3% for 2025, and for growth to remain stable at that level through 2026. However, growth for the 38 OECD member countries is expected to be somewhat more modest at just 1.9% in both years.
The OECD noted that headline inflation has continued to ease in most regions over the past year, led by further falls in food, energy and goods price inflation. However, inflation in services prices remains a concern, at c.4% in the median OECD country as of September 2024. Nevertheless, annual consumer price inflation in the G20 group of major economies is still expected to fall further and return to target in almost all these economies by late 2025 / early 2026.
The labour market remains a source of concern as, despite notable easing, labour and skill shortages persist. According to the OECD, job vacancy rates have nearly doubled over the past decade, with particularly sharp increases in sectors like healthcare and information & communications technology. Population ageing is exacerbating such trends, which show few signs of abating. Therefore, the OECD believes there is a pressing need to align labour forces and skills with emerging needs, and that this requires public and private investment, as well as reforms in education and career long learning and development.
As far as the domestic outlook is concerned, the OECD now expects the UK economy to grow more slowly this year than previously forecast, while interest rates are expected to fall more gradually over the next two years following the new Labour government’s October Budget. While additional investment is expected to boost economic activity in the near-term, higher taxes and higher spending is likely to mean the cost of borrowing would fall more slowly, acting as a drag on growth. The think tank also stated that measures announced in the Budget are likely to push UK inflation above the rate seen in other major economies.
The OECD now expects the UK economy to grow by 0.9% this year (down from 1.1%); to accelerate to 1.7% next year (up from 1.2%); and then to slow again to 1.3% in 2026. On inflation, the OECD said that it anticipates UK interest rates falling to 3.5% (from 4.75% currently) by early 2026.
The Organisation of Petroleum Producing Countries and allies (OPEC+) decided last week to delay increasing oil supplies until April 2025. The cartel - responsible for around 40% of total global supply – had earlier planned a gradual additional release of up to 2.2 million barrels per day (bpd) from October. But muted demand from China, and President-elect Trump’s assertion that he will end Russia’s war with Ukraine, are causing uncertainty. OPEC+ now plans to allow its members to hit their quotas fully by April 2026. Alas, permitting the UAE to immediately increase output by 300,000 barrels per day may incentivise others to test the bloc’s collective strategic resolve. WTI and Brent Crude oil futures prices barely budged on the news, trading within their recent ranges at c.$68 and $72 per barrel respectively - similar levels to a year ago. All things equal, lower oil prices are good for consumers.
In other news… Bank of England Governor Andrew Bailey said in a speech he expects four interest rate cuts in 2025… Bitcoin leapt over the $100,000 mark on Trump’s nomination of Paul Atkins – a cryptocurrency advocate – to lead the US Securities and Exchange Commission… China banned certain rare earths such as gallium, germanium, antimony for export to the US, as potential trade and tariff wars ratchet up… and South Korea’s main equity exchange, the KOSPI, shed c.4% after a failed attempted oust the country’s leader, with stalwart Samsung’s share price relatively unchanged.
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