No Rate Cut Likely in December

December Rate Cut Unlikely Without New Data 

This week brought the first major economic release since the Federal Government reopened. The Bureau of Labor Statistics (BLS) published its September Jobs report. They also indicated that they would be unable to issue a standard October Jobs report and would instead combine the data with the scheduled November report. This report would be delayed until December 16, AFTER the December 10 Federal Reserve (Fed) meeting.  

Based on recent comments from several Fed members, it appears that they will likely not cut rates without receiving more current economic data, including the jobs data on December 16. This may lead to a pause in rate cuts. Hopefully, after the new year, we will get a continuation of those cuts.  

September Jobs Report Beats Expectations 

We received the first Jobs report since early September on Thursday. This was the September BLS Jobs report. It showed that 119,000 jobs were created, stronger than the 50,000 jobs expected. The previous two months continued the trend of negative revisions. After the revisions, the average number of jobs created over the past 5 months is 38,600.   

Birth Death Model Changes Coming 

As we have discussed, the BLS uses the Birth-Death model to project the creation and closure of small businesses to estimate employment. The BLS has announced that it will change itsmethodology in January.  The first report using this update is scheduled for early February to present the January jobs numbers.   

Unemployment Rate Ticks Higher 

The second component of the report, the Household Survey, showed that the unemployment rate increased to 4.4%. The unemployment rate was .01% away from rounding to 4.5%. While this report wasn’t all roses, it likely wasn’t bad enough to prompt the Fed to cut rates on its own come December 10.   

Jobless Claims Signal Labor Market Strain 

Initial jobless claims fell slightly to 220,000 last week. This report measures the number of individuals filing unemployment claims for the first time. Continuing claims rose to 1.974M peopleand are the highest level since 2021. The story this paints is that employers are holding on to employees, but once you lose your job, it is very hard to get another. 

Looking Ahead: Holiday Week and Key PPI Report Coming Up 

Next week is shortened due to the Thanksgiving holiday. Our commentary will continue the following week. There is an important Produce Price Index (PPI) Wholesale Inflation report on Tuesday that could move rates.   

Have a wonderful Thanksgiving!