#JobsReport #FederalReserve #InterestRates
The recent jobs report has significantly impacted market expectations regarding interest rate cuts. The Bureau of Labor Statistics revealed that nonfarm payrolls increased by 272,000 in May, surpassing the Wall Street consensus of 190,000. Additionally, average hourly earnings rose 4.1% over the past 12 months, exceeding expectations. This data suggests a still-vibrant labor market, which diminishes the need for the Federal Reserve to lower interest rates in the near future.
The strong jobs report has led to a decrease in bets on rate cuts. Futures traders now see almost no chance of a reduction at the Federal Open Market Committee's meeting next week or on July 30-31. The probability of a September move has also decreased to about 54%, with a 50% chance of a second cut before the end of the year.
Despite the strong jobs report, some experts believe the Fed will still lower interest rates. Rick Rieder, chief investment officer of global fixed income for BlackRock, points to softness in demand for workers and a trend of part-time employment outpacing full-time positions. He suggests the Fed can lower the Fed Funds rate from very restrictive territory to merely restrictive positioning. Citigroup economists also expect the Fed to start cutting rates in September, citing slowing hiring demand and the broader economy.
Perspective
The comments section reflects a mix of reactions to the jobs report. Some investors are pessimistic about the lack of rate cuts, while others see opportunities in the data. Experts like Rick Rieder and Citigroup economists believe the Fed will still lower interest rates, citing underlying trends in the labor market.
Data
- The Federal Reserve's dual mandate includes maintaining both full employment and stable prices.
- The unemployment rate rose to 4% in May, indicating a still-vibrant labor market.
- Inflation is running above the Fed's 2% target, with most gauges showing annual price increases around 3%.
Original Article: https://www.cnbc.com/2024/06/07/market-backs-off-on-hopes-for-interest-rate-cuts-following-strong-jobs-report.html
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