But have you already reached the plateau?
US job market eases some interest rate hike concerns
November 3rd, 2023, 3:09 p.m
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Fewer new jobs were created in the USA in October than expected. The previous month’s figure was also revised downwards. Investors see this as a sign of the impact of Fed policy. This makes it less likely that they will raise interest rates again this year.
The hot US labor market cooled down in October and relieved the financial markets of concerns about rising key interest rates. According to the government’s labor market report, 150,000 new non-agricultural jobs were added. Economists, however, had expected an increase of 180,000. Traders on the futures markets now believe the likelihood of a rate hike by January is very low. At the same time, interest rate cuts could be getting closer – possibly as early as May instead of June as previously assumed. The most important indices on the stock exchanges increased their profits.
In addition, the job engine did not rev up quite as strongly in September as initially reported: the job growth was revised from the originally reported 336,000 to 297,000 jobs. However, the separately determined unemployment rate surprisingly rose to 3.9 percent in October. Experts had expected the rate to remain at the previous month’s value of 3.8 percent.
The US central bank Fed is combating high inflation with a tight monetary policy line. At the same time, she wants to ensure that the hot labor market cools down. It recently kept the key monetary policy rate in the range of 5.25 to 5.50 percent and the door was open for an increase.
The Fed sees the cooling of the labor market as an important prerequisite for achieving its two percent inflation target over the long term. “Although job growth continues to be decent, the tighter monetary policy is leaving more and more signs of a slowdown,” say Commerzbank experts Christoph Balz and Bernd Weidensteiner: “Shouldn’t there be a nasty surprise with the inflation data that is due before the December meeting “The Fed will not raise interest rates at the last meeting in 2023.” According to the two economists, the interest rate peak has already been reached.
With an eye on inflation pressures, the Fed is also paying attention to wage growth. Average hourly wages increased by 4.1 percent in October compared to the previous year. Experts had only expected an increase of 4.0 percent. In the previous month, however, there was an upwardly revised increase of 4.3 percent: “All in all, the Fed should not feel pressured to act by the numbers,” concluded economist Ralf Runde from Helaba.