The U.S. labor market is performing better than expected, according to the latest nonfarm employment figures released Friday. The report said employment rose by 216,000 people last month, which could affect the central bank's macroeconomic policies. The Federal Reserve's interest rate decisions will shape the stock and crypto markets over the next few days.
The industry expects the Fed to change policy in the first quarter as inflation slows. If the job market had remained weak, interest rate cuts could have started as early as March. What will a resilient job market bring?
Also read: Where will Bitcoin price go in January 2024: $50,000 or $35,000?
Job market snapshot
The U.S. Department of Labor reported a significant increase in nonfarm payrolls, adding 216,000 jobs in December. With this adjustment, the growth rate in November decreased slightly from 199,000 to 173,000. The data also reveals that the unemployment rate remains constant at 3.7%. There were significant contributions from the health and government sectors.
When will the Fed change course?
This surge in employment suggests the labor market is stronger than expected and calls into question early interest rate cuts. Even if the pace of employment growth slows in 2023 compared to the previous year. Moreover, the economy has managed to avoid recession.
This situation could strengthen the case among Fed policymakers who believe it is not the time to ease policy.
What is the expected impact on Bitcoin?
Following the jobs report, U.S. stock indexes initially widened their decline, reflecting disappointment over the possibility of a delayed interest rate cut.
In contrast, the bond market saw US Treasury yields rise for both 10-year and 2-year bonds, hovering above 4%. The dollar also rose, approaching 103 yen.
For Bitcoin, these economic trends suggest that while the short-term outlook is somewhat uncertain, the medium- to long-term outlook is bullish.
A strong dollar and rising bond yields typically discourage investment in riskier assets like Bitcoin. However, in the medium to long term, factors such as the Bitcoin ETF decision, the anticipated halving event, and upcoming interest rate cuts provide a positive tone against the short-term macroeconomic backdrop.
Also read: The 100-day countdown to Bitcoin halving is approaching. Will BTC price rise?
BTC is affected by other events
While the ETF approval could increase institutional interest in Bitcoin, the halving event could tighten supply and push prices higher.
As of this writing, Bitcoin price has stabilized above $44,000 without recording significant gains or losses. All major stock indexes have returned to trading in the green.
If the Fed decides to cut interest rates early, investors are likely to move away from bonds and savings accounts due to lower returns. At that time, alternative assets like Bitcoin and other cryptocurrencies offer higher returns. Lower interest rates also make borrowing cheaper and increase market liquidity. This increased liquidity may encourage riskier investments in cryptocurrencies.
On the other hand, even if a rate cut pushes inflation above the target range, Bitcoin could still be seen as a hedge. Therefore, it looks like a favorable scenario for BTC from next quarter onwards.
Also read: Bitcoin halving proposed by the author of “Rich Dad, Poor Dad”
