Non-farm payroll data becomes the key! If the unemployment rate hits 4.7%, the Federal Reserve might really have to continue easing in January.

Friday’s non-farm report is almost becoming a policy weather vane. Citibank’s latest signal suggests that if the December unemployment rate rises to 4.7%, the Fed is likely to be forced to cut another 25 basis points in January. It sounds a bit tough, but the data will speak.

The heat of the job market is indeed cooling down. New jobs are nearly stagnant, initial jobless claims are starting to decline, and hiring demand is shrinking. Officials say they are "not panicking" and "not rushing to cut rates," but the market has already sensed a different tone. Citibank predicts that December’s job gains might only be 75,000, essentially zero growth.

Even more interesting, by 2025, the rate has already been cut by 75 basis points, and entering 2026, there might be an even more aggressive easing cycle. The market is currently pricing in 60 basis points, but Citibank’s baseline forecast is 75 basis points, with the possibility of breaking into triple digits. Falling oil prices and a warming service sector inflation have given more room for rate cuts.

All of this ultimately depends on what the non-farm data says—it’s like the key to unlocking the rate cut channel. What will the result be? We’ll find out this Friday.