Two the Point — Charting Economic Waters: Fed’s Decision and Jobs Data Analysis

In our latest update, we explore the nuances of last week’s Federal Reserve Open Market Committee meeting, where they opted to maintain interest rates within the expected range of 5.25% to 5.50%. While the central bank made subtle adjustments to its statement, the noteworthy shift lay in its recognition of moderating job growth—a signal that demands our attention.

Key Data Points:

• October’s job growth in the U.S. fell short of expectations, with only 150,000 new jobs.
• A net downward revision of 101,000 jobs for August and September suggests a slowdown in recent hiring.
• The household survey reflected a significant decline in employment, particularly among prime-age workers.
• The Sahm Rule, a reliable recessionary indicator, reveals a notable jump in the unemployment rate from 3.4% to 3.9%.

As we look ahead, we believe that the impact of rising interest rates is just beginning to permeate the economy. While we’re confident in the consumer’s ability to sustain growth in Q4 with their excess savings, a looming slowdown prompts concern. The question is whether this deceleration might lead to negative territory in 2024. With short-term trends favoring stocks due to seasonality and a more accommodative Federal Reserve, heightened market volatility is expected. It is paramount to balance insights from data against rallying risk assets, thinking probabilistically about potential outcomes, and managing portfolios accordingly. If you have questions or require further information, please don’t hesitate to contact us.