The latest employment data released by the Federal Reserve has sparked widespread discussion in the market. In December, non-farm payrolls increased by only 50,000, the lowest level since the pandemic, which seemingly contradicts the unemployment rate of 4.4%—the latter appears stable but reflects a deeper structural issue: the labor force participation rate is only 62.4%, meaning millions of people have disappeared from the labor statistics.

Details of the data warrant closer attention. The three-month average of private sector hiring is only 29,000, the lowest since 2003. Meanwhile, wage growth remains robust, and inflationary pressures show no clear signs of easing. This scenario of weak employment alongside rising wages is pushing the Federal Reserve into a dilemma: on one side is the genuine shortage of labor supply, and on the other are still high wage costs.

Market expectations for rate cuts are also undergoing significant adjustments. The initial hope for a rate cut in January has largely faded, with market bets gradually shifting to June. U.S. Treasury yields have risen accordingly, putting new pressure on global liquidity. This reflects investors’ reassessment of the outlook for a soft landing of the economy.

From a global perspective, this policy delay is already triggering chain reactions. Emerging markets continue to face upward pressure on the dollar, with ongoing risks of capital outflows. European and Asian economies are caught between export pressures and policy path choices. Risk assets are seeking balance in a "higher for longer" interest rate environment.

The economic trajectory in 2024 largely depends on the evolution of the labor participation rate and core inflation data. If employment declines modestly but remains under control, the Fed may initiate a preemptive rate cut in June; if worsening employment triggers a jump in the unemployment rate, more aggressive policy shifts could occur; but if wages and employment both fall into difficulty, policymakers will face stagflation risks. Any of these scenarios could trigger intense market volatility.