The Zhitong Finance App learned that the Federal Reserve will welcome a series of job market data next week, which will provide an important basis for its next decisions. Despite the limited reliability of government data, it is expected that this data will further reveal a slowing trend in the job market.

Job Market Data and Prospects for Interest Rate Cuts

The November employment report to be released next Friday is expected to correct the distorted data for October due to the hurricane and strike. Non-farm payrolls increased by only 12,000 in October, with private sector employment falling by 28,000, mainly affected by hurricanes Helene and Milton and the Boeing (BA.US) strike. Non-farm payrolls are expected to rebound to 190,000 in November, higher than the average for the past 12 months, according to a Bloomberg survey. This data will be an important decision-making basis for the Federal Open Market Committee (FOMC) meeting of the Federal Reserve on December 17-18.

Additionally, the Job Vacancies and Labor Mobility Survey (JOLTS) data released next Tuesday will also provide more clues about the job market. This data has little impact on the market, but it is still an important reference for observing the dynamics of the job market.

The unemployment rate has risen slightly, and layoffs are still low

The unemployment rate was 4.1% in October, and it may rise slightly to 4.2% in November. Although the unemployment rate rose 0.5 percentage points from the cyclical low, it did not reflect large-scale layoffs. According to the data, the number of new claims for unemployment benefits is still at an all-time low. The four-week average was 217,000, close to the lowest level since the 1960s.

However, according to JOLTS data, despite fewer layoffs, recruitment activity has fallen to its lowest level since 2014 (not including during the COVID-19 pandemic). Job vacancies fell by 0.5 million to 7.5 million in September, and the ratio of job vacancies to the number of unemployed fell to 1. 1:1 from a 2:1 peak in 2022. Economists at J.P. Morgan Chase said that the rise in the unemployment rate is mainly due to a decline in the job search success rate, not an increase in job loss.

Inflationary pressures and the impact of tariff policies

Although the job market is still healthy, the cooling trend of inflation is not obvious. The personal consumption expenditure (PCE) index rose 0.2% month-on-month in October, and the core PCE (excluding food and energy) rose 0.3%, all in line with expectations. However, core PCE rose 2.8% year over year, up from 2.7% in September. Furthermore, the “supercore” service PCE (excluding the impact of housing), which is regarded by Federal Reserve Chairman Powell as an important indicator of core inflation, rose 0.4% month-on-month in October, and the year-on-year growth rate rose to 3.5% from 3.2% in September, indicating that inflationary pressure is still increasing.

At the same time, the new administration's trade policy is likely to push up commodity prices even further. Trump recently said that on his first day in office, he will raise tariffs on imported goods from Canada and Mexico by 25% and impose an additional 10% tariff on Chinese goods, which may have an impact on the trend of inflation.

Market expectations and policy prospects

Based on the stability of the job market and the persistence of inflation, the market generally expects the Federal Reserve to lower the federal funds rate target range by 25 basis points from the current 4.50%-4.75% meeting at the December meeting. According to the CME FedWatch tool, the market's probability of pricing this result was 66.3% as of last Friday.

However, with regard to the 2025 policy path, the market currently only expects two 25 basis point interest rate cuts, while the economic forecast for the Federal Reserve's September meeting anticipated that interest rates will be cut four times next year. This reflects the current healthy job market, continued inflationary pressure, and uncertainty about the new government's policies that may limit the room for interest rate cuts.

Overall, the resilience of the job market and higher than the target level of inflation may make the Fed more cautious in cutting interest rates. The next economic data will continue to dominate policy trends, and the extent and frequency of interest rate cuts in December still need more confirmation.