Softer October jobs report provides the US Federal Reserve time to maintain interest rates unchanged at its next Fed meeting, experts believe. The US Federal Reserve has earlier said that its decision regarding the interest rates will depend on Jobs report for October 2023 and certain other macro data points. “Data dependent” central bank is expected to see one more jobs report – and two inflation readings – before it meets for the final time this year.
As per the jobs report for October 2023, the US nonfarm payrolls saw an expansion by only ~150,000 last month, the Bureau of Labor Statistics data showed. This number fell short of experts’ estimate for ~170,000 new hires, and far softer in comparison to average of 258,000 jobs per month created in previous year.
Investors and traders opine that headline number was impacted by auto workers strike. Excluding the impact of this strike, hiring would have increased by ~180,000 in the previous month. Unemployment rate, which is determined from separate survey, increased up to 3.9%. This was the highest level since January 2022. As determined from jobs report for October 2023, slowdown in hiring provides the US Fed rate setting committee, the FOMC, proof that labor market continues to cool down.
The US Federal Reserve announced the widely-expected move of leaving interest rates unchanged at 22-year high in its recent meeting. Now, experts believe that the US Federal Reserve will for 3rd straight “hawkish pause” in the meeting which is expected to take place in December. As on November 3, interest rate experts gave ~96% probability to the Fed leaving interest rates unchanged.
Labor market is the base upon which the US Fed considers future of monetary policy. Overall, the take from jobs report for October 2023 is that labor market has started to cool in a way which should permit inflation to fall and US Fed to stop increasing key interest rates. Traders and investors believe that bond and stock markets rally basis this report.
Therefore, this report was a Fed-friendly report, as job growth slowed, the jobless rate increased, and wages cooled. Therefore, the overall softness in the report is expected to go a long way in restricting Fed from raising interest rates.
Even though September’s payrolls report was later revised down by ~39,000, payroll expansion of ~297,000 was around 2x the size of jobs report for October 2023.
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