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Analysis

Non Farm Payrolls Update | After 150K Jobs Four Rate Cuts Projected for 2024

BY Janne Muta

|November 3, 2023

Non Farm Payrolls Update - On Wednesday, Federal Reserve Chair Jerome Powell indicated that the cooling labour market is one reason why the central bank might not need to increase interest rates further. Today’s weak jobs report provides additional evidence for this, leading traders to speculate that the Fed will reduce rates four times next year. Consequently, risky assets are rallying, while the USD is trading lower at the time of writing.

Summary of This Non Farm Payrolls Update:

  • October's job addition of 150K, well below the expected 180K, hints at a cooling labour market, with speculation of four Fed rate cuts in 2024, as manufacturing strikes affect job numbers.
  • Fed Chair Powell's observation on a decelerating labour market has led markets to bet on four rate cuts in 2024, triggering a surge in risky assets and a downturn in USD value.
  • Robust labour force participation is climbing despite slower job growth, which could stabilize wage growth and inflation, amidst market expectations of increased rate cuts next year.

Read the full Non Farm Payrolls update below.

October Job Figures

In October 2023, the US economy added 150K jobs, which is significantly fewer than the 297K jobs reported in September, following a revision. The figure also fell short of the forecasted 180K. This deceleration in job creation suggests a slackening labour market, partly due to strikes that have impacted manufacturing jobs.

Although the payroll numbers for October were below the 12-month average, they still surpassed the monthly figure required to match the growth of the working-age population. The robust labour market is drawing individuals back into job seeking, lured by the potential of higher wages and benefits.

Workforce Participation

The participation rate of working-age individuals, either employed or in search of work, has increased, recently reaching its highest level in over two decades. This greater workforce participation could simplify the recruitment process for employers, potentially moderating wage growth and inflation.

Wage Growth Insights

The average hourly earnings for all employees on private nonfarm payrolls rose by 0.2% from the previous month, which saw a higher revised growth of 0.3%. This increment was marginally below the market's expectation of a 0.3% increase.

Over the past year, average hourly earnings have climbed by 4.1%, marking the most modest 12-month rise since June 2021. This rate slightly surpassed the market forecast of a 4% increase but was less than the previous month's upwardly revised 4.3% growth.

Economic Momentum

These figures indicate an economy that is losing momentum as it deals with heightened borrowing costs due to the Federal Reserve's earlier interest rate hikes, persistent inflation, and ongoing conflicts in Europe and the Middle East.

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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