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Bullish Panic Maneouvre
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We have Payrolls this Friday at 8:30 am EST. The most important number this month. Unemployment is expected to stay at 3.9%, and the headline employment number at 190k. Last month’s October jobs report was the first one this year where the headline number came in below market expectations, though not by enough to raise concerns over the resilience of the US economy. Unlike September, when US jobs surged by 297k, jobs growth slowed in October to 150k, while the unemployment rate ticked higher to 3.9%, a sign that the US economy is now starting to slow in a manner that will please the US Central Bank.
Also weak was an ADP report released the same week showing job growth slowed to 113k. ISM services survey yields have slipped back significantly from their October peaks. They are below the levels they were a month ago, signaling that the market thinks rate hikes are done, moving on to when to expect rate cuts.
This is the next challenge for the US central bank, which will be keen to continue to push the higher for longer rates mantra. It’s also worth noting that JOLTS job openings are still at elevated levels of 9.55m, and weekly jobless claims continue to trend at around 210k, which means the Fed still has plenty of leeway to push back on current market pricing on rate cuts. 200k jobs are expected to be added in November; however, it should also be remembered that a lot of additional hiring takes place in the weeks leading up to Thanksgiving and the Christmas period, so we’re unlikely to see any evidence of cracking in the US labor market this side of 2024.
We will break down scenario analysis on potential trades in this week's Musing.
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