Fed seen on course for rate cuts after weak jobs data

ANY doubts the Federal Reserve will go ahead with an interest-rate cut next week fell away on Friday (Nov 1) after a government report showed US employers added fewer workers in October than in any month since December 2020.

The 12,000 increase in non-farm payrolls last month was far short of the 113,000 economists had anticipated, even after they tried to account for tens of thousands of workers kept off the job by a Boeing strike and the impact of two large hurricanes in the South-east.

The unemployment rate, however, remained at 4.1 per cent, in what some analysts took as an indication that the labour market remains strong and much of the unexpected weakness in payrolls will be reversed when the strike is resolved and as hurricane damage is repaired.

Some 512,000 people reported they were unable to work due to bad weather, the most for any October since the Bureau of Labor Statistics began tracking that figure in 1976.

“The nonfarm payrolls may not be great on its face, but this recent drop should be a temporary miss as rebuilding and activity pick up after the hurricanes and with the likelihood of the Boeing strike ending,” said Byron Anderson, head of fixed income at Laffer Tengler Investments.

Traders of futures that settle to the Fed’s policy rate were pricing about a 99 per cent chance of a quarter-point interest-rate cut on Nov 7, to 4.5 per cent-4.75 per cent, compared with 92 per cent earlier. But notably, rate-futures prices reflected no chance the Fed would deliver another half-point interest-rate cut, as it did in September when it began easing policy to head off deterioration in labour markets.

SEE ALSO

US job growth slows sharply in October; unemployment rate unchanged at 4.1%

Key US inflation gauge and spending pick up in solid economy

Traders are now pricing about an 83 per cent chance that the policy rate will be in the 4.25 per cent-4.50 per cent range by year-end, compared with 69 per cent before the data, and have firmed up bets the Fed will bring the rate down to 3.50 per cent-3.75 per cent by July 2025, versus September 2025 previously. REUTERS