Data from the United States job market is not presenting a reliable situation. This is because it has been distorted by the impact of one-time factors. Obviously, we’re talking about the Helen and Milton hurricanes and employee strikes. The result of adding 12,000 new jobs did not cause a collapse on Wall Street, which shows that the market was prepared for a sharp deviation from the norm. The indices eventually gained. We remember how 3 months ago a weaker NFP report (but much better than the current one) caused panic and became an excuse for a stronger reduction. However, now we are in an exceptional time. The elections are becoming the number one topic and the FOMC’s decision scheduled for two days later does not arouse much emotion. The disruptions associated with the weather and the situation in many key large companies (Boeing) mean that the next data for November and December will be analyzed more closely, as they will confirm that the weak October was just a single incident.
The market assumed that fewer new jobs would be added in the US than a month earlier and estimated around the number of about 110,000. The result of 12,000 made an impression on investors only for a moment. In the first reaction, the dollar lost and the yields of US bonds fell. This is fully understandable because such weak data suggest that the Fed may alleviate monetary policy at a slightly faster pace. However, the emotions soon subsided and reason prevailed. The market quickly understood that the data should be treated as a certain kind of anomaly. It is estimated that the situation related to the “crisis” in a company that is an icon of global aviation took about 44,000 jobs. Layoffs in some automotive plants may have also had an impact on the weak result. The previous results (for August and September) were typically revised downwards (by 112,000 in total), but we have already got used to this. In reality, if it weren’t for the impact of one-time factors, the data would have been about 100,000 higher, which would have met expectations. The situation in the US labor market continued to cool down, but the pace of this process is definitely milder than the Friday numbers showed. Confirmation that there is no reason to panic is the fact that the unemployment rate remained at 4.1 percent.
There is no doubt that the price pressure, which was previously generated by a strong labor market, is definitely weakening at this moment and allows the Federal Reserve to react. The expected cut in interest rates on Thursday by 25 basis points seems to be the most realistic scenario and we should not expect any surprises in this matter. The decision should be accepted by the market quite calmly. Of course, tomorrow’s elections raise more emotions. Any result is real and it is difficult to determine at this moment who will take over the US for the next 4 years.
Author: Łukasz Zembik, Oanda TMS Brokers
Source: https://ceo.com.pl/slabe-dane-z-rynku-pracy-w-usa-jednorazowe-zaburzenia-czy-poczatek-trendu-81084
