US Job Market Steady as Trade Deficit Swells, Fed Seen Holding Rates for Now

The US labour market showed further signs of stability as weekly jobless claims declined, reinforcing views that layoffs remain contained despite slower hiring momentum. Initial unemployment claims fell to 209,000 for the week ended January 24, slightly above market expectations but consistent with recent levels. Continuing claims also eased to about 1.83 million, undershooting forecasts and indicating no surge in unemployment. However, subdued hiring continues to weigh on household confidence, suggesting underlying softness beneath the headline stability.

Trade Deficit Swells

In contrast, trade data pointed to renewed external pressures. The US trade deficit widened sharply to USD56.8 billion in November, the largest expansion in four months and far above market expectations. The deterioration was driven by a combination of falling exports and rising imports. Exports declined due to weaker shipments of non-monetary gold, pharmaceuticals and crude oil, while imports rose on stronger pharmaceutical purchases. The widening deficit partly reflects shifting US tariff policies, although recent trade measures have helped keep deficits well below early-2025 levels.

Federal Reserve

Taken together, the data suggest the Federal Reserve faces no immediate urgency to cut interest rates. While the job market remains resilient, slower hiring highlights the need for continued policy support. Markets are still pricing in two rate cuts later this year, supported by expectations that inflation pressures will ease once tariff-related price effects fade.

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