Traders Still Expect Fed Rate Cut Despite Shocking Jobs Report Miss

 Traders Still Expect Fed Rate Cut Despite Shocking Jobs Report Miss

The latest U.S. employment report for October, released Friday, has sparked mixed reactions in the markets, with traders still anticipating a rate cut from the Federal Reserve, despite the disappointing job numbers. Here are five key takeaways from the report:

1. Hiring Slows Significantly: The U.S. economy added just 12,000 jobs in October, far below the 100,000 jobs economists had expected. This marks the slowest pace of hiring since 2020. The job growth was also revised downward for the previous two months, indicating a broader slowdown in employment. Despite this, the unemployment rate remained stable at 4.1%, and hourly earnings showed no significant change, remaining firm.

2. Boeing Strike Drives Job Losses: One of the key contributors to the weak report was a strike by Boeing workers, which led to a 44,000-job loss in the transportation sector. Manufacturing payrolls saw a substantial drop, with 46,000 jobs lost—this marks the largest decline in the sector since April 2020. This drop was largely attributed to the Boeing strike, which affected 33,000 workers.

3. Weather and Hurricane Effects: The report noted that hurricanes likely had an impact on employment in some industries. However, the Bureau of Labor Statistics (BLS) said that it is not possible to quantify the exact effect these weather-related disruptions had on national employment, hours, or earnings. As a result, there is some uncertainty about the true extent of job losses in sectors such as retail, transportation, and leisure and hospitality.

4. Sectors Affected: While there was some growth in sectors such as healthcare and government, other industries saw either flat or negative employment numbers. Retail trade, transportation, warehousing, and leisure and hospitality all saw declines in October. The BLS pointed out that these drops might have been weather-related, which further complicates the interpretation of the data.

5. Market Response: Despite the disappointing jobs report, markets showed a positive reaction. Treasury yields, which had experienced their worst monthly decline in nearly two years, climbed following the report, with two-year yields down by around 8 basis points. Stock futures also rose, rebounding from a sharp slump the previous day. The S&P 500 futures were up 0.5%, indicating that investors were adjusting to the news with some optimism. The U.S. dollar remained relatively unchanged after the report.

Muddled Data Fuels Political Debate

The mixed jobs report has provided fuel for both political campaigns. On one hand, the Trump campaign may use the weak employment data to argue that the economy is faltering under the current administration. On the other hand, Vice President Kamala Harris’s campaign could frame the report as evidence of a still-resilient labor market, with gains in sectors like healthcare and government offering a more positive perspective.

In the face of this muddled data, traders continue to hold onto expectations that the Federal Reserve will opt for a rate cut, hoping that the weak employment numbers may prompt the central bank to ease up on its aggressive interest rate hikes. However, the unclear effects of the hurricanes and strikes, combined with other uncertainties, make it difficult to predict the future direction of the economy with confidence.

As the U.S. economy navigates these challenges, all eyes will remain on the Federal Reserve’s next moves, and how this evolving situation influences broader market sentiment.

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