Bloomberg notes that today's labor market data is indeed significant. A weak labor market is, let’s remember, a 'red flag' for the Fed, capable of making them consider a rate decrease.
Unemployment benefits in the USA are at their highest since the end of 2021. Extended unemployment claims (recurring claims) have risen to 1.96 million people.
The smoothed indicator of new claims (4-week average) rose to 240,250 - the highest since August 2023.
The increase in recurring claims is an indirect sign that it is becoming more difficult for the unemployed to find new jobs. At the same time, hiring rates are slowing down, which increases risks for consumer demand in the coming months. There is a signal of structural problems in the recovery of employment.
#Bloomberg adds:
- Producer inflation indicators remained moderate in May - so far, tariffs have not had a sharp effect on prices.
- The yield on Treasury bonds and the dollar exchange rate fell after the reports were published.
CME Group data on interest rate expectations after today's macro data has changed as follows:
- BEFORE: 99.8% expected a pause, and 0.2% expected an increase of 0.25 percentage points.
- AFTER: 97.1% expected a pause, and 2.9% expected a decrease of 0.25 percentage points.
The rate for the pause remained roughly the same, but the background has changed. The markets have a little less than a week until the FOMC meeting to digest this data. Let's see how expectations change. But what is more important is that, overall, today's data came out truly good enough to ensure a 'dovish' performance by Powell.
At the meeting on September 16, the majority, 60%, expect a decrease of 0.25 percentage points. If the expectation of a decrease in the fall continues to grow, we could have a bullish summer in anticipation of the event, and the decrease itself may become a 'sell the news' for the markets.
