A few cables away from the end of the year which, with the exception of French equities, promises to be a relatively good year for all asset classes, the two main central banks are still expected for their last monetary policy meeting of 2024. More than the decision itself, it is above all the visibility for 2025 that will matter. The divergence in economic trajectory between the United States and Europe has probably never been so strong and it is perhaps high time for the ECB to part ways with its American counterpart.
In the United States, the last potentially "market mover" macroeconomic figure before the end of the year, and which could still impact the Fed's decision, came out perfectly in line with expectations. The employment report thus confirms the trend of recent months: a very gradual slowdown in the labor market allowing the Fed to act but not yet bringing any particular fears about the economy. After the downwardly biased figures for October (strike at Boeing and hurricanes Helene and Milton), job creation (according to the survey conducted among companies) quite logically showed a strong rebound in November, with also upward revisions over the last two months. Thus, over three rolling months, and despite the air pocket of last month, they are at a six-month high (see graph of the week) but nevertheless remain less dynamic than at the beginning of the year. The unemployment rate, for its part, has started to rise slightly again (4.2% against 4.1% in October), with the significant job losses (according to the household survey) being partly offset by the decline in the working population. While, in the context, this unemployment rate can be considered relatively moderate, certain underlying data nevertheless deserve attention: the number of people who have lost their permanent job continues to increase to reach a 3-year high. At the same time, the average duration of unemployment is also extending to reach the levels of December 2021. These data should allow Jerome Powell to lower the Fed's key rates by an additional 25 bps on December 18 without too much trouble. The rest for 2025 is, however, less certain. It will surely take a more marked deterioration in the economy to force the Fed Chairman to act because he will have to take Donald Trump's inflationary program into account sooner or later.
On the old European side, the ECB will hold its last monetary policy meeting of 2024 this Thursday. No economic data currently seems to indicate any rebound in activity, with the French and German situations not helping. With 125 bps of key rate cuts expected by the market by next June, the ECB has the necessary weapons to put some juice back into the machine.
Finally, on the financial markets, we will note that, quite surprisingly, the French political situation has not brought additional stress on French assets. On the contrary, they have even tended to outperform since the government's censure.
