Employment: Mixed signals ahead of the Fed's decision

Summary:

U.S. employment data sends mixed signals: modest job gains, slight unemployment rise, and higher continuing claims. Markets now see a minority chance of a December rate cut, with the Fed still leaning toward holding rates.

It marks a sharp rebound after job gains had slowed markedly earlier in the year. The three-month moving average fell to 29,000 following the August report.

More broadly, the picture is mixed. Revisions for the two previous months were negative (-33,000 jobs), while the unemployment rate ticked up slightly, from 4.3% to 4.4%.

On weekly jobless claims, filings came in at 220,000, versus an estimate of 227,000. However, continuing claims edged up to 1.97 million.

Shortly after the report, expectations for a December rate cut by the Fed rose somewhat, but remain in the minority (around 40%). A rate hold at the next Fed meeting also remains our preferred scenario.

Indeed, there is nothing in these figures to shift the Fed's members' positions: as the minutes showed, the Fed is divided.

In the minutes, it is written that many participants suggested that, given their economic projections, it would probably be desirable to keep rates unchanged for the rest of the year. Conversely, several participants judged that additional patience (...) would be appropriate in December if the economy evolves as they expect.

A tone suggesting the second camp is in the minority. Since that meeting, there has been more talk of a hold in December. Minneapolis Fed President Neel Kashkari even said he thought the October cut was not necessary.

The September employment report was, in any case, the last major data point before the December 9/10 meeting.

Indeed, the Bureau of Labor Statistics (BLS) said yesterday there would be no October employment report. Jobs created in October will be included in the November report. And that report will be published only on December 16, a week after the Fed meeting.

Retail sales and producer prices for September will be released on Tuesday. The JOLTS survey will be delayed to December 9, while the October survey is canceled.

Source: marketscreener

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