Hot Jobs, Cold Fed

2025-01-11 03:15:00 ET

Summary

• Nonfarm payrolls for August increased by just 78,000, well below the 206,000 average for the twelve months prior to that.
• With inflation seemingly under control, the timing was right for an outsize interest rate cut, which duly arrived in September.
• Current expectations in futures markets have the Fed holding at current levels until possibly as late as September.

What a difference a few months can make. Late last summer, markets were freaking out about what seemed to be a rapidly cooling labor market. Nonfarm payrolls for August increased by just 78,000, well below the 206,000 average for the twelve months prior to that. The Fed, too, was noticing the apparent tapering of conditions in the jobs' environment. With inflation seemingly under control, the timing was right for an outsize interest rate cut, which duly arrived in September....

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