US non farm payroll data released, slowing pace of Federal Reserve interest rate cuts?
On October 4th local time, the latest non farm payroll data in the United States far exceeded expectations. The market expects the pace of the Federal Reserve's interest rate cuts to slow down. After the release of this data, the gold futures market experienced short-term drops, with London gold falling nearly 0.9% and COMEX gold falling over 1% at one point. The US dollar index surged sharply.
At the same time, the data also dispelled market concerns about a US economic recession. Affected by this, the three major US stock indices collectively opened higher.
Regarding non farm payroll data, US President Biden stated that the report brings good news, but there is still more work to be done in reducing costs.
Non farm employment data exceeds expectations
The US Department of Labor reported on Friday that the US economy added far more jobs in September than expected. Specifically, non farm payroll employment surged by 254000 in September, higher than the revised 15.9 in August and better than the Dow Jones' general forecast of 150000. The unemployment rate dropped to 4.1%, a decrease of 0.1 percentage points.
US Non farm Employment Data Trends (October 2021 present)
In addition, the report raised the employment data for July and August. Among them, the number of new non farm employment in July was revised from 89000 to 144000; The number of new non farm employment in August was revised from 142000 to 159000. After the revision, the total number of new jobs added in July and August was 72000 higher than before the revision.
The strong momentum of job creation has spread to wages, with average hourly wages increasing by 0.4% month on month and 4% year-on-year. These two numbers are both higher than the expected 0.3% and 3.8%.
After the data was released, the yield of the 10-year treasury bond rose to 3.959% and the yield of the two-year treasury bond rose to 3.876%.
Spot gold and COMEX gold both experienced rapid short-term declines, but gradually narrowed their declines afterwards.
The US dollar index surged and surged above the 102 level.
US stock futures quickly rose, with the Nasdaq 100 index futures expanding their gains to over 1%. Subsequently, the three major US stock indices opened higher, with the Nasdaq rising by over 1% at one point.
Will the pace of interest rate cuts by the Federal Reserve slow down?
The price level and employment situation are the two main factors considered by the Federal Reserve's monetary policy, and good employment data may affect the pace of the Fed's interest rate cuts.
After the non farm payroll announcement, the Chicago Mercantile Exchange's CME "Federal Reserve Watch" showed that the probability of the Fed cutting interest rates by 25 basis points in November was 89.4%, compared to 71.5% previously; The probability of a 50 basis point interest rate cut is 10.6%, compared to 28.5% previously. The probability of a cumulative interest rate cut of 50 basis points by December is 74.5%, compared to 45.8% previously; The probability of a cumulative interest rate cut of 75 basis points is 23.7%, compared to 44.0% previously; The probability of a cumulative interest rate cut of 100 basis points is 1.8%, compared to 10.2% previously.
GDS Wealth Management analyst Glenn Smith stated in a report that the growth rate of non farm jobs in September far exceeded expectations, allowing the Federal Reserve to flexibly choose to cut interest rates by 25 basis points in November or pause the cuts. He said, "In the next few reports, labor market data may be affected by a series of factors, such as port strikes and the damage caused by Hurricane Helena
Rick Rieder, Chief Investment Officer of BlackRock Global Fixed Income, stated that the Federal Reserve will implement two more 25 basis point interest rate cuts this year, partly to alleviate the burden on a large number of people who are suffering from high borrowing costs. But he also believes that the Federal Reserve will continue to cut interest rates until 2025 because interest rates are still too high relative to inflation levels.
Economists believe that the September non farm payroll report in the United States was unexpectedly strong, with a decrease in unemployment but rapid labor growth, an increase in full-time jobs, and a decrease in net unemployment. The prospect of a soft landing for the US economy has become bright.
In a public speech on September 30th, Federal Reserve Chairman Powell emphasized that the Fed's current goal is to support a fundamentally healthy economy and job market, rather than to rescue struggling economies or prevent economic downturns.
Powell said, "Our decision (to cut interest rates by 50 basis points) reflects our increasing confidence that, with appropriate adjustments to our policy stance, the good momentum of the labor market can be maintained against the backdrop of moderate economic growth and sustainable inflation reduction to 2%
Powell also said, "If the economic performance meets expectations, it will mean two more interest rate cuts this year (each by 25 basis points)
Powell emphasized that the US economy and employment situation are generally healthy, and stressed that the Federal Reserve is "readjusting" key interest rates rather than cutting them quickly like in emergency situations. He believes that interest rates are moving towards a 'relatively neutral position', which neither stimulates nor suppresses the economy. Federal Reserve officials have consistently set the so-called 'neutral interest rate' at around 3%, significantly lower than the current level.
