“Goldilocks” Jobs Report Provides “Permission Structure” for December Rate Cut (Then What?)…Treasuries Rally
Today’s jobs report indicated the economy added 227,000 jobs in November. This came on the heels of October disruptions from storms and major strikes (September and October numbers were revised upward). Wage growth rose a little higher than expected, up 4% annually. That “warm” data was tempered by the increase in the unemployment rate up to 4.2% from 4.1% last month. The overall takeaway is a labor market that isn’t overheating and not in danger of crashing (soft landing scenario).
Fed Futures bets indicate an 85% probability of a 25 bp rate cut at the December 18 meeting (Powell will not be the Grinch that paused Christmas, see below). The 10-year Treasury rallied to 4.15% (down from 4.27 on Wednesday).
What’s Next? Fed officials are preparing markets for a pause. Fed President Hammack: “We are at or near the point where it makes sense to slow the pace of rate reductions.” Fed Gov Bowman: “I continue to see greater risks to price-stability…I would prefer that we proceed cautiously and gradually in lowering the policy rate, as inflation remains elevated.” Futures markets indicate a 75% chance of a pause at the January meeting. Stay tuned!
By David R. Pascale, Jr., Senior Vice President at George Smith Partners.
