Fed gets ‘green light’ for another interest rate cut following jobs report
Economists expect the US Federal Reserve to cut interest rates again in December after the US labour market posted a “modest” rebound last month.
The latest jobs report showed that the world’s largest economy added 227,000 jobs last month, slightly ahead of the 200,000 expected by economists.
This marked a strong recovery from October, when strikes at Boeing and hurricane Milton contributed to a very poor month for jobs growth. Revised figures published today showed that just 36,000 jobs were created in October.
The recovery was largely driven by the unwinding of October’s one-off effects, but Stephen Brown, deputy chief North America economist at Capital Economics, said the figures still imply underlying employment growth in November was “a touch stronger” than the month before.
Unemployment, meanwhile, increased marginally to 4.2 per cent from 4.1 per cent previously, in line with expectations.
Samuel Tombs, chief US economist at Pantheon Macroeconomics, said the figures had given the Fed the “green light to ease policy again” in December.
Fed officials are paying close attention to developments in the labour market for clues about how monetary policy is impacting the economy.
The Fed has cut rates twice already this year, bringing the federal funds rate down to a range of 4.50-4.75 per cent, but markets are unsure about the pace of rate cuts in the new year.
The latest inflation figures showed that the headline rate picked up to 2.6 in October, up from 2.4 per cent the month before.
Given the persistence of inflation, Jerome Powell, chair of the Fed, has signalled that he will back a gradual approach to dialling back monetary restrictiveness.
“The US economy is in very good shape and there’s no reason for that not to continue,” he said at an event earlier this week. “The good news is that we can afford to be a little more cautious as we try to find neutral.”