Jan 9 (Reuters) – A drop in the U.S. unemployment rate may ease concerns at the Federal Reserve about labor market weakness and build the case for a longer hold on the policy rate, with traders betting the central bank will wait until June to resume reductions.
The unemployment rate fell to 4.4% last month from a revised 4.5% in November, the U.S. Labor Department reported Friday, even as employers added a fewer-than-expected 50,000 jobs in the month.
The improvement in the jobless rate, even with continued loss of momentum in monthly job gains, gives the central bank more breathing room to leave short-term borrowing costs where they are as it waits for better data on inflation.
U.S. central bankers last year reduced the policy rate by three quarters of a percentage point in a bid to keep the job market from softening, even as hawkish U.S. central bankers argued that doing so could slow or even imperil progress on bringing down above-target inflation.
Short-term interest rate futures dropped after the jobs report.
Traders now see just a 45% chance of a rate cut by April, versus about 50-50 odds before the report, with a June resumption to rate cuts seen as the far more likely timing.
(Reporting by Ann Saphir; editing by Philippa Fletcher and Chizu Nomiyama )
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