Labour demand in the US began to weaken months before new immigration policies, according to Standard Chartered. Economists suggest that since April 2024, job growth figures were likely overstated by around 60,000 jobs per month due to birth-death adjustments. Actual job growth was likely weaker than initially perceived by the market.
Revisions Reveal True Employment Growth
In December 2024, Federal Reserve Chair Powell indicated that the nonfarm payroll (NFP) data was overstated by 60,000 per month. Standard Chartered estimates an overstatement of 70,000 jobs but agrees with Powell’s 60,000 figure for their report. With revisions, 2024’s employment growth was less robust than initially believed.
They argue that immigration wasn’t the driving force behind employment growth in 2024, contrary to popular opinion. Labour demand had already been declining before the Trump administration’s immigration policies were implemented. After accounting for biases, nonfarm payroll likely averaged 70,000 jobs per month between April and December 2024, against the initially reported 150,000. Alternative data sources like QCEW suggest even larger downward revisions for that period.
We are now seeing the real-world effects of the labor market slowdown that actually began back in 2024. The reported overstatement of job growth back then helps explain why the most recent November 2025 jobs report came in at a weak +50,000. This softness is now a confirmed trend, not a new shock to the system.
This economic weakness has shifted the outlook for Federal Reserve policy, with inflation cooling to 2.8% last month. We see increasing odds of a rate cut in the first quarter of 2026, a significant change from just a few months ago. Traders should therefore consider positioning for lower rates, for example by using options on SOFR futures to bet on a dovish Fed pivot.
Market Protective Strategies
The underlying weakness in employment poses a risk to corporate earnings and consumer spending, which have propped up equity markets. The S&P 500’s forward P/E ratio, currently around 20, looks high given that Q3 2025 GDP growth was just 0.5%. We believe buying protective put options on major indices like the SPX could be a prudent strategy against a potential market correction in the coming weeks.
The discrepancy between last year’s data and this year’s economic reality creates significant uncertainty, which is a key driver of market volatility. The CBOE Volatility Index (VIX) has been hovering around 18, a level that seems too low given the questions about the economy’s true strength. We think long volatility positions, such as buying VIX call options, offer a relatively cheap way to hedge against a spike in market turbulence.
A dovish Federal Reserve, combined with a slowing US economy, makes the US dollar less attractive relative to other currencies. Looking back, similar periods of Fed easing, like the one that began in 2019, have often led to dollar weakness. Therefore, strategies that anticipate a lower dollar, like call options on the EUR/USD or GBP/USD currency pairs, could perform well into early 2026.
