has the pace of u.s. interest rate cuts changed? ! the release of this important data caused gold to dive in the short term and the us dollar to rise.
2024-10-05
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u.s. non-farm payrolls data released, will the fed slow down the pace of interest rate cuts?
on october 4, local time, the latest non-farm employment data in the united states far exceeded expectations. markets expect the fed's pace of interest rate cuts to slow. after the release of this data, gold futures all experienced short-term dives, with london gold falling by nearly 0.9% and comex gold falling by more than 1%. the u.s. dollar index jumped sharply.
at the same time, the data also dispelled market concerns about a u.s. economic recession. affected by this, the three major u.s. stock indexes collectively opened higher.
regarding the non-farm data, u.s. president biden said that the non-farm report brought good news, but there was still more work to be done in terms of reducing costs.
nonfarm payrolls data exceeds expectations
the u.s. labor department reported on friday that the u.s. economy added far more jobs than expected in september. specifically, nonfarm payroll employment surged by 254,000 in september, higher than the revised 15.9 in august and better than the 150,000 consensus forecast by dow jones. the unemployment rate fell to 4.1%, a decrease of 0.1 percentage points.
trends in u.s. non-farm employment data (october 2021 to present)
in addition, the report raised employment data for july and august. among them, the number of new non-agricultural jobs in july was revised from 89,000 to 144,000; the number of new non-agricultural jobs in august was revised from 142,000 to 159,000. after the revision, the total number of new jobs in july and august was 72,000 higher than before the revision.
the strong momentum in job creation spread to wages, with average hourly earnings increasing 0.4% month-on-month and 4% year-on-year. both figures were higher than expectations of 0.3% and 3.8%.
after the data was released, the yield on the 10-year u.s. treasury note rose to 3.959% and the yield on the two-year u.s. treasury note rose to 3.876%.
both spot gold and comex gold fell sharply in the short term, but then gradually narrowed their losses.
the u.s. dollar index surged and rushed above the 102 mark.
u.s. stock futures rose rapidly, with nasdaq 100 index futures expanding to more than 1%. subsequently, the three major u.s. stock indexes opened higher, and the nasdaq once rose by more than 1%. however, the gains of the three major indexes have now narrowed.
will the fed's rate cuts slow down?
price levels and employment conditions are the two main considerations for the federal reserve's monetary policy. good employment data may affect the pace of the federal reserve's interest rate cuts.
after the release of non-farm payrolls, the cme "fed watch" showed that the probability of the fed cutting interest rates by 25 basis points in november was 89.4%, the previous data was 71.5%; the probability of cutting interest rates by 50 basis points was 10.6%, the previous data was 10.6% 28.5%. the probability of a cumulative 50 basis point interest rate cut by december is 74.5%, compared with 45.8% previously; the probability of a cumulative 75 basis point interest rate cut, compared with 44.0% previously; the probability of a cumulative 100 basis point interest rate cut, is 1.8%. the previous figure was 10.2%.
glenn smith, an analyst at gds wealth management, said in a report that non-farm payrolls grew much faster than expected in september, giving the federal reserve the flexibility to cut interest rates by 25 basis points in november or suspend interest rate cuts. "over the next few reports, labor market data will likely be affected by a range of factors, such as port strikes and disruption from hurricane helene," he said.
rick rieder, chief investment officer of global fixed income at blackrock, said the fed will implement two more 25 basis point interest rate cuts this year, in part to ease the burden on a large number of people who are suffering from high borrowing costs. but he also believes that the fed will continue to cut interest rates until 2025 because interest rates are still too high relative to the level of inflation.
economists believe that the u.s. non-farm payrolls report in september was unexpectedly strong across the board. the unemployment rate fell but the labor force grew rapidly. the number of full-time jobs increased and the number of net unemployed jobs fell. the prospects for a soft landing of the u.s. economy have become brighter.
in a public speech on september 30, federal reserve chairman powell emphasized that the fed’s current goal is to support a basically healthy economy and job market, rather than to rescue a struggling economy or prevent an economic recession.
"our decision (to cut interest rates by 50 basis points) reflects our growing confidence that, with appropriate adjustments to our policy stance, the labor force will continue to grow in a context of moderate economic growth and a sustainable decline in inflation to 2 percent," powell said. the good market situation can be maintained.”
powell also said: "if the economy performs as expected, that would mean two more rate cuts (25 basis points each) this year."
powell stressed that the u.s. economy and employment conditions were largely healthy and emphasized that the fed was "resetting" key interest rates rather than cutting rates quickly as it would in an emergency. he believes that interest rates are moving towards a "relatively neutral position", that is, neither stimulating nor suppressing the economy. fed officials have been setting the so-called "neutral interest rate" at around 3%, well below current levels.
