Last week the market received what it interpreted as a ‘goldilocks’ jobs number. Not too hot. Not too cold. But just right. Non-farm payrolls (NFP) increased by 199,000 in November, according to the BLS. This was around 19,000 higher than market expectations – however not hot enough for the Fed to raise rates this week. As an aside, the Government added 49K jobs as part of the 199K (inline with their monthly average). The unemployment rate, meanwhile, fell to 3.7% from 3.9%, marking the longest stretch of unemployment below 4% since the 1970s. That’s essentially a full employment picture. So here’s my question – why would the Fed consider cuts at full employment?
Fed Warns, Stocks Shrug
“We still have a long way to go” – that was the not-so subtle warning from Jay Powell this week. After what many felt was a slightly less hawkish Fed Chair last week – sparking an equity rally – Powell attempted to adjust his tone at an IMF event. Was he successful? That’s hard to say – as equities seemed to shrug off any warning from the Fed – surging ahead to be up 15% year-to-date. Here’s my question: are investors being too sanguine about what’s still unknown?
For Now, A Slowing Economy is Good News
A weaker than expected October payrolls print sent stocks flying and bond yields sharply lower. The S&P 500 finished at 4358 – a whopping 5.9% for the week. It was the market’s best week for the year. Renewed bullish enthusiasm was mostly due to investors betting the Fed is done. And that makes sense. For example, if employment, growth and inflation continue to soften – there’s every possibility the Fed has hit its terminal rate. However there is a caveat. Not only will the Fed need softer economic data – they are hoping the bond market continues to keep financial conditions tight (i.e. bond yields stay high)
Just How ‘Strong’ was the Sept. Jobs Report?
Never take a headline print at face value. There’s always more to the story – where it pays to dive into the details. Digging below the surface takes some work – however it’s worth doing. Last week was a great example. The BLS told us 336,000 jobs were added vs expectations of 160,000. Sounds strong? But was it? Not really. For example, since June 2023, full-time employment is lower by some 696,000 jobs
For a full list of posts from 2017…