In the United States, virtually no jobs were created in October, which speaks volumes for an economy that has continued to create jobs over the past four years as it emerged from the pandemic. The unemployment rate remains unchanged at 4.1%; But the figures released today open the door to an acceleration of reductions by the Federal Reserve in the coming months if weakness in the labor market continues.
Jobs increased by 12,000 jobs during the month of October. These numbers are so low that they have not been seen since December 2020, when the country was emerging from the pandemic. The market consensus expected the creation of 110,000 jobs. The month before, employment increased by 254,000 net additions.
The unemployment rate remained unchanged at 4.1% in October and the number of unemployed remained virtually unchanged at seven million people.
It must be taken into account that the figures are marked by the impact in certain states in the southeast of the United States of the passage of hurricanes Helen and Milton and the Boeing employee strike. The Ministry of Labor says the labor dispute caused the loss of 44,000 transportation-related jobs, with the effect of the hurricanes on employment “not being quantifiable.”
The Fed derivative
“The biggest problem is that it is very likely that these figures were distorted by the impact that the passage of hurricanes Helen and Milton had on the labor market in certain states in the southeastern United States and by the strike of Boeing employees”, comments Juan José Fernández-Figares, director of management at Link Securities.
The expert warns that it will be difficult for both investors and members of the Federal Reserve (Fed) to draw conclusions from the aforementioned employment report. But the evolution of employment, or rather its strength, drove Powell and his men crazy to define a road map with rates. Yesterday’s inflation data changed market expectations and put an end to future cuts.
But the financial swaps market continues to anticipate a 25 basis point cut at next week’s meeting (Wednesday, November 7) and three more cuts through the March 2025 meeting, following employment data . Currently, the Fed is maintaining the interest rate range between 4.75% and 5%. This roadmap assumes that the bottom of the down cycle will be between 3.75% and 4%, after four consecutive declines.
