On Friday, the US Nonfarm Payrolls (NFP) report significantly exceeded economists’ expectations, rising by 254,000 in September, while forecasts had predicted only a 140,000 increase. Additionally, the US unemployment rate dropped to 4.1% from 4.2%, easing market concerns about an economic downturn, as noted by the Bureau of Labor Statistics (BLS).
The significance of the NFP report cannot be overstated; since August, the labor market has taken precedence over inflation as the primary focus for the Federal Reserve (Fed). In a key address, Fed Chairman Jerome Powell emphasized, “We do not seek or welcome further cooling in labor market conditions.”
The robust NFP data has substantially diminished the likelihood of the Fed implementing a double-rate cut of 50 basis points (bps) in November. The probability of such a scenario has plummeted to zero from around 35% before the report’s release, with markets now pricing in over a 10% chance that the Fed may not cut interest rates at all, as indicated by the CME FedWatch tool.
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