This Week's US Employment Data Floods In... Small Cut Likely on the 18th

Nonfarm Payrolls Data Released on the 6th
JOLTs and ADP Private Employment Reports Also Announced
Impact on FOMC Rate Decision on the 18th

This week, U.S. employment indicators will be released one after another. With the U.S. Federal Reserve (Fed) signaling a cautious approach to interest rate cuts, the employment data released before the December Federal Open Market Committee (FOMC) meeting is expected to have a significant impact on the rate decision.

According to the U.S. Department of Labor on the 1st (local time), the November nonfarm payroll employment data will be announced on the 6th.

The market expects nonfarm payrolls to have increased by 200,000 based on Bloomberg’s forecast. Due to the impact of two hurricanes and the Boeing strike, the increase in October was limited to 12,000. However, considering that nonfarm payrolls rose by 223,000 in September, it is anticipated that the increase will not be substantial. The unemployment rate is expected to have remained steady at 4.1%, the same as the previous month.

Anna Wong, an economist at Bloomberg Economics, said, "The November jobs report is likely to show improvement compared to October," but added that due to the hurricanes and strike, "the weakness in October was caused by temporary factors, so there will not be a strong rebound in November." She also predicted, "The pace of job growth will be slower than the speed needed to stabilize the unemployment rate."

Other employment indicators will follow in quick succession. On the 3rd, the U.S. Department of Labor’s October Job Openings and Labor Turnover Survey (JOLTs) will be released; on the 4th, ADP’s November private nonfarm employment data; and on the 5th, weekly initial jobless claims will be published.

These employment indicators are expected to influence the interest rate decision at the FOMC meeting scheduled for the 17th-18th. In particular, if the nonfarm payrolls released by the Department of Labor meet expectations or confirm a gradual easing of the labor market, the Fed is likely to cut rates next month as anticipated. However, if the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE) price index inflation rates rebound in October and employment turns out to be stronger than expected, the pace of the Fed’s rate cuts could slow down. In the minutes of the November FOMC meeting released earlier, Fed officials mentioned gradual rate cuts and indicated a policy of slowing the pace of monetary easing. Fed Chair Jerome Powell also stated last month that the U.S. economy is strong and there is no need to rush rate cuts.

For now, the market is pricing in a high possibility of a rate cut this month. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market reflects a 68.9% chance that the Fed will cut rates by 0.25 percentage points at the December FOMC meeting and a 31.1% chance of holding rates steady. However, there is growing expectation that the Fed will slow the pace of rate cuts starting next year. The federal funds futures market currently reflects a 60% chance that the Fed will hold rates steady in January next year. The probability of a 0.25 percentage point cut this month followed by another cut of the same magnitude in January is only 16.2%.

Additionally, this week features a series of speeches by Fed officials including Chair Powell, Fed Governor Christopher Waller, New York Fed President John Williams, and Chicago Fed President Austan Goolsbee. Through their remarks, clues about the current economic assessment, outlook, and future interest rate path are expected to be gleaned. On the 4th, the Fed’s Beige Book, a report on economic conditions, will also be released.

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