Delayed and Incomplete Data Releases Start: Markets React to Fed Speak Today
Government data releases are trickling out post shutdown. This week’s delayed release of the September jobs report was “inconclusive” – 119,000 jobs created (bullish), but the unemployment rate rose to 4.4% (bearish). Note that July and August jobs numbers were revised lower (so how much faith do we have in the September data?). The unemployment rate increase is due to more participation in the job market. Corporate job layoff announcements continue: Verizon, Target, Amazon, and UPS all within the last month. It’s estimated that 150,000 federal workers will be unemployed by year-end as cuts become official.
Delayed Data: The announcement by government agencies that critical jobs and inflation reports are now scheduled for release the week of Dec 15. That means they won’t be available to Fed officials at the December 9-10 meeting. That announcement, along with the release of the October Fed minutes, sparked a sell-off in Treasuries as the 10-year Treasury spiked to 4.16% this week. The October Fed minutes indicated (guess what?) a very divided Fed committee. “Several” policymakers were against lowering the Fed’s benchmark rate. From the minutes: This group feels “it would likely be appropriate to keep the target range unchanged for the rest of the year,” (hawkish). But “several participants” said another cut “could well be appropriate in December if the economy evolved about as they expected.” Several on each side – a very divided Fed.
That perception led into today’s comments from New York Fed President John Williams, which really moved markets. Williams is a highly respected “centrist” on the rate-setting committee. He said: “Therefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby maintaining the balance between the achievement of our two goals.” (Dovish!). Markets: the 10-year Treasury dropped to 4.05% and Fed Futures odds of a December 25-bp cut jumped from 39% to 75% in minutes (note it was 98% last month). Stay tuned…
By David R. Pascale, Jr., Senior Director