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
Have Jobs Slowed Enough for the Fed to Pause?
Last week offered plenty of macro data for traders (and the Fed) to consider. Core PCE remains stubbornly higher at 4.2% YoY – moving higher month on month. However, there is signs of a slowing labor force – with job additions missing expectations. The question is whether the jobs market is now slowing enough for the Fed to end rate hikes? For example, total unemployment is very strong at 3.8% and there are almost 9M open jobs. That’s not a weak labor market…
One Trend That Isn’t Sustainable
More “bad news is good news” hit the tape today… The monthly ADP private jobs number came in far weaker than expected. I say ‘good news’ as it potentially means less Fed (or at least that’s the assumption). Here’s CNBC: “Job creation in the United States slowed more than expected in August, according to ADP, a sign that the surprisingly resilient U.S. economy might be starting to ease under pressure from higher interest rates”
For a full list of posts from 2017…