The Strong September Jobs Report and Its Impact on Federal Reserve Rate Cuts
In response to a stronger-than-expected September jobs report, Wall Street analysts are suggesting that the Federal Reserve may slow the pace of rate cuts. Capital Economics predicts that the Fed will likely cut rates by 25 basis points (bps) after the labor market showed resilience with a gain of 254,000 non-farm payrolls. The unemployment rate also fell to 4.1%, and average hourly earnings saw a resurgence with a 0.4% month-over-month rise, pushing annual wage growth to 4.0%.
Vital Knowledge echoed similar sentiments, highlighting recent strong economic data and suggesting a 25bps rate cut in November. Despite this, they remain optimistic, stating that stocks shouldn't mind as rate cuts are still happening. Evercore ISI called the report a "stronger-than-expected" signal that reassures the Fed it is "not behind the curve." They see a 25bps rate cut as likely in November but emphasized that the business cycle remains solid.
Morgan Stanley added that despite some softness in manufacturing, the broad reacceleration of the labor market supports the view that the Fed will implement 25bps rate cuts in both November and December. They noted that strong payroll incomes support consumption into the fourth quarter and Chair Powell's baseline is 25bp cuts assuming no further cooling.
In summary, the strong September jobs report has led analysts to predict a 25bps rate cut by the Federal Reserve in November, with potential additional cuts in December. This could have implications for the overall economy and financial markets, so investors should monitor these developments closely to make informed decisions about their portfolios.