Swissquote Bank: Jobs market strength is playing tricks on the Fed

Swissquote Bank: Jobs market strength is playing tricks on the Fed

1 november 2023

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Algemeen (31) dilemma vraag kwestie probleem

Any further strength in US jobs data will reinforce a potentially hawkish stance from the Fed policymakers this week.

‘The US dollar index consolidated a touch below last month peak. The US consumer confidence index dropped to a 5-month low, but the latest wages data continued to give signs of strength’, comments Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, today. ‘The employment cost index, a top-notch gauge of what employers spend on compensation, rose 1.1% in Q3 – slightly higher than a quarter earlier. Wages and salaries rose 4.6% above the US headline CPI, and well above 3% as before the pandemic. And that was before the UAW reached a jaw-dropping deal with Detroit’s 3 carmakers where they nailed a 25% increase in wages and around 150% increase in compensations for the low-paid tier of temporary workers. The ADP data is expected reveal around 150K new private job additions in October, and JOLTS data is expected to show a drop in job openings. On Friday, we will have a look at the official figures. The latter won’t impact the Fed expectations for this week’s policy decision. But any further strength in US jobs data will reinforce a potentially hawkish stance from the Fed policymakers this week.’

‘The jobs market strength is playing tricks on the Fed, and it’s clearly not loose enough. The chances are that we won’t hear anything soothingly dovish. ‘The higher yields help us do the job’ is the best it will get.’

‘The S&P500 rose on the last day of October but recorded its longest monthly slide since the pandemic. Still, the index kicks off the new month a touch above the major 38.2% retracement which should distinguish between the continuation of last year’s rally, and a slide into the medium-term bearish consolidation zone. The next direction will depend on whether the US yields will consolidate and eventually come lower, or they will continue their journey higher. In the second scenario, we will likely see major US stock indices sink into a bearish trend.’

 

 

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