Weak US employment data signals, and the Federal Reserve may continue to loosen policy next year

[BlockBeats] The US employment data released on December 18th has attracted widespread market attention. UBS’s latest analysis points out that this set of data reveals some signs of weakness in the labor market, which is likely to support the Federal Reserve’s implementation of further rate cuts in early next year.

UBS Chief Economist Paul Donovan explicitly stated in a client report that these data “sound multiple alarms.” However, it is important to note that the government shutdown has led to a decline in survey response rates from the Bureau of Labor Statistics, and there is some uncertainty about the data quality itself.

Morgan Wealth Management Investment Strategist Alese Osenbor also shares a similar view. She believes that October’s data is particularly concerning, further reinforcing market expectations of the Federal Reserve’s current policy direction. The “insurance-style” rate cuts over the past few months, though cautious, have already adjusted interest rates back to a relatively neutral range.

Looking ahead to the first quarter of 2026, Osenbor believes it may be appropriate to cut rates again. However, based on current economic performance, the situation remains stable for now. The Federal Reserve is temporarily patient, continuing to observe subsequent economic data and market performance before making further decisions.