Jobs Data Disruptions Put Fed In Tight Spot Weeks Before Crucial December Rate Call

• Part of the market weakness seen in November was due to hawkish signals from a majority of Fed officials, which reduced the odds of a rate cut. 
• The SPY and QQQ ETFs have lost about 3% and 4.6%, respectively, since the start of November. 
• According to the CME FedWatch Tool, which is based on futures traders' expectations, the odds of a status quo stance are 70.4%.

The updated release calendar for the Bureau of Labor Statistics (BLS)’s monthly jobs data showed that the agency would skip the October non-farm payrolls data and would release the November data on Dec. 16.

Incidentally, the September data, delayed by the 43-day-old government shutdown that has since ended, will be released at 8:30 a.m. ET on Thursday. 

The BLS has also cancelled the September Job Openings and Labor Turnover Survey (JOLTS) report, and the October data will be released on Dec. 9.

Fed In A Fix

The unusual development now puts the Federal Reserve, headed by Chair Jerome Powell, in a tight spot. The central bank has been professing a data-dependent stance as the economy navigates through a host of uncertainties on multiple fronts. With no data on the key economic variable, the agency will find it difficult to justify its stance in either case (a pause or a cut).

The next meeting of the Federal Reserve Open Market Committee (FOMC), the central bank's rate-setting committee, is scheduled for December 9-10. The post-meeting policy statement will also be accompanied by the Summary of Economic Projections and the dot plot curve.

According to the CME FedWatch Tool, which is based on futures traders' expectations, the odds of a status quo stance are 70.4%, and those for a quarter-point cut are 29.6%. Prediction market Polymarket puts the odds of a pause at 69% and a quarter-point cut at 30%. 

Part of the market weakness seen in November was due to hawkish signals from a majority of Fed officials, which reduced the odds of a rate cut. 

The SPDR S&P 500 ETF (SPY) and the Invesco QQQ Trust (QQQ), the exchange-traded funds tracking the S&P 500 and the Nasdaq 100 indices, have lost about 3% and 4.6%, respectively, since the start of November. 

Why The Trust In the Jobs Market?

While deliberating the Fed funds rate, the central bank adheres to its dual mandate of maintaining price stability and maximizing employment. Inflationary pressure has stabilized, although remaining steady above the central bank’s 2% target. 

In a recent public appearance, Fed Governor Christopher Wallace, a dovish member, said he is worried about a demand-driven labor market softening. Explaining why he was not unduly concerned about inflation, he said, “Despite inflation running above target for five years, inflation expectations are well-anchored in the medium- and long-term.”

Waller pointed out labor market data that highlighted the lean patch this section of the economy was going through. The labor market stalled during the May through August period, and subsequent data did not show vibrancy. Citing ADP’s private payrolls data, he said businesses created a net total of only 6,500 jobs per month in September and October.

He noted that slowing labor demand was underscored by employer and worker surveys, citing the Conference Board’s index of job availability and the National Federation of Independent Business (NFIB) survey.

The Fed official said, “After months of weakening, it is unlikely that the September jobs report later this week or any other data in the next few weeks would change my view that another cut is in order.” 

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Read Next: Nvidia May Have Just Scored Big In DC — White House Reportedly Urges Congress To Oppose China Chip Curbs

Share

·

Add us on