When the 33k strikers are added back into US nonfarm payrolls, October’s job growth was in line with expectations. The point is that nearly every other component was disappointing. The job growth of the previous two months was revised lower by 101k. The household survey reported a loss of 348k jobs, and the unemployment rate rose 0.1% to 3.9%. After revisions, the average earnings slowed to 4.1% from 4.3%, year-over-year, and the average work week fell back to its cyclical low of almost 34.2 hours. Aggregate hours fell by 0.26%, the most in two years. The measure of under-employment rose by 0.2% to 7.2%, the highest since early last year. The report is consistent with the slowdown that is widely expected after the heady 4.9% annualized pace in Q3. The early estimates for Q4 GDP appear to be coming in between around 1.0% and 1.5%. This is a light week for important US economic data, but next week will likely see a decline in headline inflation and retail sales.

At recent post-FOMC press conferences, word or phrase seemed to capture the markets’ imagination, like “patience” or “caution.” Perhaps, this time, the most important word was “persistence” in reference to the threshold of the change in rates impacting the monetary policy. The issue was about whether the increase in market rates was doing of some of the Fed’s tightening for it. The Fed Chair recognized that short-term movements are noisy and that what mattered for policy makers were persistent moves. About a month after the FOMC’s September FOMC meeting, the 10-year had risen by about 70 bp to 5.0%. Separately, note that today’s quarterly Senior Loan Officer Opinion Survey is likely to point to further tightening of financial and credit conditions, which the FOMC statement seemed to recognize. After the employment report, ahead of the weekend, and this week’s quarterly refunding, the yield briefly traded at 4.50%. In the past two-and-a-half weeks, the US two-year has fallen from about 5.20% to 4.80%. The implied yield of the December 2024 Fed funds futures settled last week at 4.42%, the least in two months. It was near 4.90% on October 18. Before the weekend, the market was pricing in about 90 bp of cuts by the end next year. It is now pricing in about 85 bp of cuts.”