The Federal Reserve signals a rate cut

Data released by the U.S. Bureau of Labor Statistics on February 5th shows that signs of cooling in the U.S. labor market are becoming more evident. The number of job openings in December dropped to its lowest level in over five years, significantly below market expectations, and the previous month’s data was also revised downward, indicating continued weakening of labor demand through the end of the year.

According to the JOLTS report released by the U.S. Bureau of Labor Statistics (BLS), the number of job openings in December 2025 fell to 6.542 million, the lowest since September 2020, well below the market expectation of 7.25 million. Meanwhile, the November 2025 data was revised downward from 7.146 million to 6.928 million.

At the same time, data shows that in December, 1.762 million people were laid off or fired, a slight increase from 1.701 million in November. Industry-wise, the decrease in job openings was mainly concentrated in professional business services and retail sectors, which have relatively high employment shares; layoffs were mostly in transportation, technology, and healthcare industries, highlighting industry differentiation.

Earlier, due to partial “shutdown” of the U.S. federal government, the Bureau of Labor Statistics paused data collection, processing, and release from February 2 to 3. The December JOLTS report, originally scheduled for earlier release, was delayed. Meanwhile, the January non-farm payroll report, originally scheduled for release on February 6, was postponed to February 11, and the January Consumer Price Index report, initially planned for February 11, was rescheduled to February 13.

However, other indicators in the JOLTS report show that while the labor market is cooling, it has not yet “stalled.” Hiring in December increased by 172,000 to 5.293 million, roughly unchanged from a year earlier but still relatively low; voluntary quits rose slightly, often seen as a sign of resilience in the labor market, indicating some workers can still find new opportunities; layoffs increased at the end of last year but remained moderate, with an overall layoff rate of about 1.1%, roughly the same as the previous year.

Additionally, influenced by signs of weakening in the labor market, U.S. Treasury yields declined overall last week, with short- to mid-term Treasury yields falling the most, prompting traders to bring forward expectations for the first rate cut to June or July. However, following a strong rebound in U.S. stocks last Friday, Treasury yields slightly rebounded on the same day.

The JOLTS report has always been one of the highly watched labor market indicators by the Federal Reserve. The release of this key data has reignited market expectations for a rate cut by the Fed. The Fed previously announced in its January policy meeting that it would keep interest rates unchanged. Fed Governor Christopher Waller had proposed a 25 basis point rate cut during that meeting to prevent further weakening of the labor market. The employment data released this time aligns with his concerns.

San Francisco Fed President Mary Daly stated in a recent interview last weekend that she believes the Fed may need to cut interest rates once or twice more to address the softening U.S. labor market. She pointed out that American workers are currently in a difficult situation because rising prices have eroded wages, and new job opportunities are scarce.

On February 9th, according to CME “FedWatch”: the probability of a 25 basis point rate cut by the Fed by March is 19.9%, with an 80.1% chance of holding rates steady. The probability of a cumulative 25 basis point cut by April is 31.1%, with a 65.2% chance of no change, and a 3.7% chance of a cumulative 50 basis point cut. The probability of a 25 basis point cut by June is 51.1%.