Rates fall in the aftermath of today’s labor data. December rate cut odds climbed after this morning’s labor data showed rising unemployment from October to November. Rates fell 8 bps at the front end of the curve in the immediate aftermath of the data and were little changed throughout the remainder of the session. Ultimately, rates closed 1-5 bps lower across the curve today and over the course of the week. Meanwhile, the NASDAQ reached a new all-time high today after a 0.81% rally.
Labor data helps case for a December cut. Nonfarm payrolls growth in November landed 7,000 above expectations, and the unemployment rate ticked slightly higher from 4.1% to 4.2% on the month. October’s figures were upwardly revised, but only slightly. The results landed within ranges that were expected to keep the door open for a 25bp rate cut in December and futures-implied odds of a cut climbed from 70% to ~85% after the release. Now, eyes are on next week’s CPI data for a look at the other side of the Fed’s mandate. Speaking after the release, Fed Governor Bowman and Fed President Hammack reiterated a desire to cut rates slowly and cautiously, towing the usual lines.
Core CPI growth is expected to remain flat from October to November. Core consumer inflation is expected to be +3.3% YoY and +0.3% MoM in November, the same as October’s levels. That would mark the third consecutive month of 3.3% YoY CPI after a drop to 3.2% in August and July, the lowest level since April 2021. Despite idle progress in the fight against inflation, a pause at this month’s FOMC meeting will remain unlikely, barring a significant upside CPI surprise. Core PPI will be released next week as well after coming in at 3.1% YoY in October.
