December's jobs report came in hotter than expected with the US adding 216,000 jobs, defying predictions of a cooling labor market. The surprise strength of wages and hiring comes ahead of the Federal Reserve's interest rate cuts anticipated for 2024.

Yahoo Finance's Jennifer Schonberger analyzes December's upside employment surprise, discussing the Fed's predicament as labor resilience challenges the disinflation narrative underpinning imminent rate relief.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith.

Video Transcript

- Let's kick it off with our top story of the day, the December jobs report coming in hotter than expected on the headline number, the US adding 216,000 jobs during the month of December. Now, it is the first of a slew of data that the Fed is going to be getting before their first meeting of the year.

Here to break all this down and what this report could mean for the Fed's next decision, we want to bring in Yahoo Finance's Jennifer Schonberger. Jen.

JENNIFER SCHONBERGER: Good morning, [? Jana. ?] First jobs report since the Fed signaled it is finished raising rates and could soon cut rates sometime this year, but the December jobs report coming in much stronger than expected on all metrics, whether it was that top line nonfarm payroll number, wage growth, or the drop in the labor force participation rate, all likely to take the possibility of a rate cut that Wall Street has priced in for March off the table.

And indeed, if you look at the CME futures, those bets are being dialed back this morning. The job market based on today's this morning's data still too hot for the Fed's taste. They would really need to see job growth in the area of 100,000 or less on nonfarm payroll numbers per month and wage growth closer to 3%, rather than the 4% that we've been getting, for them to consider cutting rates.

Now, if we do look at the revisions, I want to point out a trend that we've been seeing, which is that the job reports keep coming in very strong initially, but then they are revised lower subsequently. And you saw that in the months of October and November in this very report, October was revised down to 105,000 while November was revised down to 175,000. So collectively, 71,000 fewer jobs for those two months combined, showing that perhaps the job market is coming into a bit of a better balance and cooling than what we saw on the top line number this morning.

Still, taken together, there is nothing in this morning's jobs report or the latest jobs data that indicates that the Fed is going to cut rates any time soon. And frankly, guys, if we continue to see such strong job reports month after month, you got to wonder if they're going to consider hiking again. Guys.

- All right, Yahoo Finance's Jennifer Schonberger always keeping us on our toes. Possibility of additional rate hikes in 2024. Jen, we'll talk to you later on this hour.