In the lead up to last Friday’s US Payroll (NFP) report, there were several Federal Reserve officials, as well as many market commentators, who believed that a better-than-expected jobs report would increase the likelihood of a November rate hike. Even FED “dove “Charles Evans seemed to warm to the idea that above trend growth in employment would justify a near-term move in the Fed Funds target.
However, the less than spectacular Non-Farm Payroll report saw the odds of a November move scaled back materially, the USD lose some of its gains for the week.
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We have never really supported the speculation about further rate normalization at the November FOMC meeting. There is no historic precedent for any FED policy change so close to a Federal election and the current FED will likely want to show a political and independent posture.
In addition, the November FOMC doesn’t have a scheduled press conference nor are any updated economic forecasts scheduled for release. These scheduling issues wouldn’t completely preclude a rate hike if the recent data was extremely strong; which is not the case. On balance, the NFP report was solid even though the headline new jobs component was weaker-than-expected. Private sector jobs gained 167,000, while the participation rate rose to 63% which is the best rate since February of 2014.
Chart – US 10yr
Dow Jones
