US job creation collapses but Fed to “overlook” data, Trump victory raises doubts on December rate cut
|On face value, this is a disastrous nonfarm payrolls report. Net job creation not only slowed in October, but completely collapsed, falling to its lowest level since December 2020. But the sell-off that we’ve seen in the dollar off the back of the data has been very much contained thus far.
The reason being is that market participants are largely attributing the slowdown in hiring to temporary factors, notably the impact of hurricanes Helene and Milton, and strikes in the transport and hospitality sectors, rather than to any underlying issues.
We don’t think that today’s report changes things too much for the Fed, which looks highly likely to deliver a ‘standard’ 25 basis point rate cut next week. We suspect that the FOMC will largely overlook today’s data, with upcoming rate decisions set to be far more heavily impacted by the outcome of Tuesday’s US election.
A victory for Trump could raise doubts over a December cut, and the Fed may strike a more hawkish note as a result, provided we know the definitive result of the election by the time of Thursday’s meeting.
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