US job market eases some of the interest rate hike worries
The hot US labor market cooled down in October, easing the financial markets' concerns about rising interest rates. According to the government's labor market report, 150,000 new non-farm jobs were added. Economists, however, had expected an increase of 180,000. Traders on the futures markets now consider the probability of a rate hike by January to be very low. At the same time, interest rate cuts could come closer - possibly as early as May instead of June as previously assumed.
In addition, the job engine did not rev up quite as strongly in September as initially reported: Job creation was revised from the originally reported 336,000 to 297,000 jobs. However, the separately calculated unemployment rate surprisingly rose to 3.9 percent in October. Experts had expected the rate to remain at the previous month's figure of 3.8 percent.
The US central bank, the Fed, is combating high inflation with a tight monetary policy. At the same time, it wants to ensure that the hot labor market cools down. It recently kept the key monetary policy rate in the range of 5.25 to 5.50 percent and left the door open for an increase.
The cooling of the labor market is seen by the Fed as an important prerequisite for achieving its two percent inflation target in the long term. "Although job growth is still decent, the tighter monetary policy is increasingly leaving its mark," say Commerzbank experts Christoph Balz and Bernd Weidensteiner: "Unless there is a nasty surprise in the inflation data due before the December meeting, the Fed will not raise interest rates at the last meeting in 2023 either." According to the two economists, the interest rate peak has already been reached.
With a view to inflationary pressure, the Fed is also paying attention to wage growth. Average hourly wages rose by 4.1 percent in October compared to the previous year. Experts had only expected an increase of 4.0 percent. In the previous month, however, growth had been revised upwards to 4.3%: "All in all, the Fed should not feel pressured to act by the figures," concludes economist Ralf Umlauf from Helaba.
- The Fed's interest rate policy has been influencing the economic situation in the USA, with the central bank maintaining a tight monetary policy to combat high inflation and cool down the hot labor market.
- Traders in the futures markets have adjusted their expectations for interest rate decisions, with the possibility of a rate hike by January now seen as very low due to the easing of the labor market.
- The interest rate policy of the Fed, including key interest rate decisions, will be closely watched by economists and traders as they assess the potential for interest rate cuts in the coming months.
Source: www.ntv.de
