Clarity
The Bureau of Labor Statistics yesterday ended speculation on the fate of data produced during the recent US government shutdown. As a result of the inability to collect key household data, notably on unemployment, it has announced that there will not be an October jobs report. Moreover, what little data that was collected in October will be rolled into an extraordinary November publication to be released in December. Economists will no doubt be scratching their heads as to how this may disturb economic models. What will be concerning traders somewhat more will be that, as a result of these ad hoc changes, the publication date for December has been shifted.
Critically for markets, this new publication date is after the Fed’s December meeting. The new date for the release of the November jobs report is December 16th. This means that the Fed is certain to still be flying blind at its decision day on December 10th. As a reminder, US inflation remains elevated and economic growth, although rhetorically cautioned, likely remains sufficiently robust within the data to justify benchmark rates where they stand today within their 3.75-4% band. It was a weak labour market in the US which was the key rationale for those voices calling for further rate cuts this year.
As of yesterday evening, there remained just 6-basis points of implied easing for the December meeting. As a reminder, the September payrolls data is expected to be released today. Barring any great deviation from the expectation of 50 thousand jobs having been added to the US economy the month before last, the potency of this data release may be limited due to its untimely release. The removal of the prospect of a December rate cut may help the US Dollar to continue its consolidation into year end with Fed minutes last night also contributing to the narrative of a Fed that is content with rates where they stand.
Discussion and Analysis by Charles Porter
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