Labour demand in the US started to decline months before new immigration policies, as reported by Standard Chartered. Economists believe that since April 2024, job growth numbers were likely exaggerated by about 60,000 jobs each month due to adjustments for births and deaths. This means actual job growth was probably weaker than what the market thought.

Revisions Show True Employment Growth

In December 2024, Federal Reserve Chair Powell noted that the nonfarm payroll (NFP) data was overstated by 60,000 jobs each month. Standard Chartered estimates this overstatement to be 70,000 jobs but aligns with Powell’s figure for their report. After revisions, it appears that employment growth in 2024 was not as strong as initially believed. They argue that immigration was not the main factor behind employment growth in 2024, despite common belief. Labour demand had already started to fall before the Trump administration’s immigration policies were put in place. Once adjustments are made, nonfarm payroll is likely to show an average of 70,000 jobs per month from April to December 2024, compared to the original report of 150,000. Other data sources, like QCEW, suggest even larger downward adjustments for that time. We are now witnessing the real effects of the labour market slowdown that began in 2024. The inflated job growth numbers from that time help explain why the recent November 2025 jobs report showed a weak increase of just +50,000 jobs. This weakness is now a confirmed trend, rather than a sudden issue. This economic weakness is changing expectations for Federal Reserve policy, as inflation dropped to 2.8% last month. There’s an increasing chance of a rate cut in the first quarter of 2026, a major shift from just a few months earlier. Traders may want to position themselves for lower rates, for example, by trading options on SOFR futures to bet on a shift towards a more lenient Fed.

Market Protective Strategies

The underlying weakness in job growth poses risks to corporate profits and consumer spending, which have supported equity markets. The S&P 500’s forward P/E ratio is currently around 20, which seems high given that Q3 2025 GDP growth was only 0.5%. We think that buying protective put options on major indices like the SPX could be a smart strategy to guard against a possible market correction in the near future. The disparity between last year’s data and this year’s economic situation creates considerable uncertainty, which is a key factor driving market volatility. The CBOE Volatility Index (VIX) has been around 18, a level that appears too low considering the questions surrounding the economy’s real strength. We believe that long volatility positions, such as purchasing VIX call options, provide an inexpensive way to protect against a surge in market instability. A dovish Federal Reserve, together with a slowing US economy, makes the US dollar less appealing compared to other currencies. Historically, similar periods of Fed easing, such as the one beginning in 2019, have often resulted in dollar weakness. Therefore, strategies that anticipate a declining dollar, like buying call options on the EUR/USD or GBP/USD currency pairs, could perform well into early 2026. Create your live VT Markets account and start trading now.

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