John Toohig’s Post

#marketreflection (2/8/2024) Treasury yields slumped after data showed the world's largest economy created fewer jobs than expected in July, boosting expectations of multiple rate cuts by the Federal Reserve this year. Friday's data showed that nonfarm payrolls increased by 114,000 jobs last month after rising by a downwardly revised 179,000 in June. The unemployment rate ticked up to 4.3%. "A 50 basis-point Fed cut in September is clearly justified as the labor market is now showing clear signs of softening," wrote Yung-Yu Ma, chief investment officer at BMO Wealth Management, in emailed comments. "The Fed is already falling behind the curve and rates are overly restrictive – a 50 basis-point cut in September would only be catching-up to, rather than getting ahead of, the curve." Benchmark 10-year notes rose 1- 15/32, yielding 3.8016%, while two year notes were up 17/32 to yield 3.8839%. 30-year bonds rose 2– 25/32, yielding 4.%. The dollar fell after a weaker-than expected employment report for July raised expectations that the Federal Reserve will cut interest rates by 50 basis points in September as the economy sours. "This is what a growth scare looks like. The market is now realizing that the economy is indeed slowing," said Wasif Latif, president and chief investment officer at Sarmaya Partners in Princeton, New Jersey. The dollar index was down 1.17% at 103.20. New economic releases will now be even more closely watched for confirmation on whether the growth outlook is as bad as feared. Against the Japanese yen, the dollar fell 11.86% to 146.58 yen. *US Market Focus* 05.08.24 9:45 am S&P final U.S. services PMI 10:00 am ISM services #affinmoneybrokers

The robust employment means that Americans will keep spending on consumer goods and services which, in turn, can create inflationary pressures, in addition to those expected as a result from the Trump administration’s policies. Next week on Wednesday, the CPI report will shed more light on price growth and, by extension, on Fed’s expected moves. CEIC's machine learning nowcast does not project any substantial decline in inflation in December. 𝐂𝐄𝐈𝐂 𝐮𝐬𝐞𝐫𝐬 𝐚𝐜𝐜𝐞𝐬𝐬 𝐜𝐡𝐚𝐫𝐭𝐬 𝐡𝐞𝐫𝐞 ➡️https://lnkd.in/ejdZTnPY 𝐍𝐨𝐭 𝐚 𝐂𝐄𝐈𝐂 𝐮𝐬𝐞𝐫? 𝐑𝐞𝐪𝐮𝐞𝐬𝐭 𝐚 𝐭𝐫𝐢𝐚𝐥 𝐭𝐨 𝐜𝐡𝐞𝐜𝐤 𝐭𝐡𝐞𝐦 𝐨𝐮𝐭 ➡️ https://lnkd.in/eSbyvS7p hashtag #nonfarmpayroll hashtag #employment

Recent data from the U.S. Federal Reserve highlights a slowdown in economic activity and a softening labour market, supporting the likelihood of imminent rate cuts and a surge in global liquidity. The Fed's latest survey shows that while seven of its districts experienced some growth, five saw flat or declining activity. The unemployment rate hit a 2.5-year high, and wage growth has slowed. These developments align with the Fed's strategy to manage inflation and labour market conditions, suggesting potential rate cuts later this year. Read the full article here 👇

Analysis: If the US unemployment rate rises to 4.4%, a 50 basis point rate cut will become a high probability event #cryptonews - According to BlockBeats, on September 6, Michael Reid, an economist at RBC Capital Markets, said that if the unemployment rate rises to 4.4%, a 50 basis point rate cut will become a high probability event. But he also said that if the unemployment rate falls and job growth remains at 100,000 or above, the Fed will be cautious about a large rate cut. Especially with the presidential election approaching, the Fed may be accused of favoring the ruling party by cutting interest rates to boost the economy. The futures market expects the Federal Reserve to cut interest rates by 25 […] https://lnkd.in/daJYamwg

The US economy added significantly more jobs than expected in December: 256,000 non-farm payrolls vs consensus expectations of around 160,000. The latest print is the highest since March 2024. The unemployment rate, which was projected to remain at 4.2% y/y, declined 0.1 percentage points. The strong job report puts the brakes on Fed’s rate cutting journey, delivering disappointment to the markets. The US Federal Reserve Board already updated its projections in December, anticipating only two rate cuts in 2025 instead of four, as previously intended. The “higher for longer” interest rates will apply upward pressure to the US dollar, and conversely – will weigh on emerging markets currencies, which will potentially see capital flight. The robust employment means that Americans will keep spending on consumer goods and services which, in turn, can create inflationary pressures, in addition to those expected as a result from the Trump administration’s policies. Next week on Wednesday, the CPI report will shed more light on price growth and, by extension, on Fed’s expected moves. CEIC's machine learning nowcast does not project any substantial decline in inflation in December. 𝐂𝐄𝐈𝐂 𝐮𝐬𝐞𝐫𝐬 𝐚𝐜𝐜𝐞𝐬𝐬 𝐜𝐡𝐚𝐫𝐭𝐬 𝐡𝐞𝐫𝐞 ➡️https://lnkd.in/ejdZTnPY 𝐍𝐨𝐭 𝐚 𝐂𝐄𝐈𝐂 𝐮𝐬𝐞𝐫? 𝐑𝐞𝐪𝐮𝐞𝐬𝐭 𝐚 𝐭𝐫𝐢𝐚𝐥 𝐭𝐨 𝐜𝐡𝐞𝐜𝐤 𝐭𝐡𝐞𝐦 𝐨𝐮𝐭 ➡️ https://lnkd.in/eSbyvS7p #nonfarmpayroll #employment

The US economy added significantly more jobs than expected in December: 256,000 non-farm payrolls vs consensus expectations of around 160,000. The latest print is the highest since March 2024. The unemployment rate, which was projected to remain at 4.2% y/y, declined 0.1 percentage points. The strong job report puts the brakes on Fed’s rate cutting journey, delivering disappointment to the markets. The US Federal Reserve Board already updated its projections in December, anticipating only two rate cuts in 2025 instead of four, as previously intended. The “higher for longer” interest rates will apply upward pressure to the US dollar, and conversely – will weigh on emerging markets currencies, which will potentially see capital flight. The robust employment means that Americans will keep spending on consumer goods and services which, in turn, can create inflationary pressures, in addition to those expected as a result from the Trump administration’s policies. Next week on Wednesday, the CPI report will shed more light on price growth and, by extension, on Fed’s expected moves. CEIC's machine learning nowcast does not project any substantial decline in inflation in December. 𝐂𝐄𝐈𝐂 𝐮𝐬𝐞𝐫𝐬 𝐚𝐜𝐜𝐞𝐬𝐬 𝐜𝐡𝐚𝐫𝐭𝐬 𝐡𝐞𝐫𝐞 ➡️https://lnkd.in/ejdZTnPY 𝐍𝐨𝐭 𝐚 𝐂𝐄𝐈𝐂 𝐮𝐬𝐞𝐫? 𝐑𝐞𝐪𝐮𝐞𝐬𝐭 𝐚 𝐭𝐫𝐢𝐚𝐥 𝐭𝐨 𝐜𝐡𝐞𝐜𝐤 𝐭𝐡𝐞𝐦 𝐨𝐮𝐭 ➡️ https://lnkd.in/eSbyvS7p hashtag #nonfarmpayroll hashtag #employment

The US unemployment rate is stable and historically low. That's nothing to complain about, right? Well, except if you're the Federal Reserve and you're trying to bring down core inflation. With such a strong labor market, this is going to be extremely hard. Based on the current trend, there might not be much room for rate cuts this year. So the Federal Reserve can't really cut rates much without risking a rise in core inflation. And it can't raise rates without seriously damaging the financial markets. That doesn't leave many options in the near future. Follow Macro Chart Deck for more charts and insights on markets and macro.

Market Update: U.S. Treasury yields were relatively flat on Friday after October jobs data showed meager job growth that was hurt by hurricanes and striking workers and was far below what Wall Street was expecting. The October nonfarm payrolls report showed a gain of just 12,000 jobs for the month. Economists surveyed by Dow Jones were expecting growth of 100,000 jobs. The Bureau of Labor Statistics cautioned that the report was impacted by hurricanes and the strike at Boeing. Those complications may have dampened the reaction to the miss among traders. The unemployment rate held steady at 4.1%. The murky jobs report could play a role in next week’s meeting of Federal Reserve officials, where the central banks will decide how to follow up September’s 50-basis-point rate cut. Investors this week have weighed a series of key economic reports published throughout the week, including Thursday’s personal consumption expenditures price index, the Fed’s favored inflation gauge. The index rose 2.1% in September on an annual basis and 0.2% from the previous month. Both of those readings were in line with expectations of economists polled by Dow Jones. The markets were last widely pricing in a 25-basis-point rate cut at its upcoming meeting on November 7th. What to Expect with Rates: The latest economic data shows an economy that is still relatively strong although the latest jobs report showed much lower jobs being created (given hurricanes and strikes may have contributed to this number) so all data will need to be closely watched moving forward. The Presidential Election and uncertainty surrounding who will control the Senate has added some short-term uncertainty. Rates have been moving higher although longer term given our overall debt which continues to rise, and continued hopeful easing of inflation, should force rates lower. However, rates may be higher for longer. I would anticipate continued volatility.

Relative comfort on inflation should allow the Fed to shift its focus to the goal of full employment. However, with labour market data pointing in different directions, we sift through the mixed messages and the impact on the Fed’s rate cut plans.

Relative comfort on inflation should allow the Fed to shift its focus to the goal of full employment. But with labour market data pointing in different directions, we sift through the mixed messages and the impact on the Fed’s rate cut plans.