According to a report from the US Department of Labor, non-farm jobs are down compared to the previous month. This has generated a sharp increase in market shares. This hiring drop, parallel to its common increase in wages, is bad economy news but good news as the market reacts positively to it.
The Federal Reserve understands that it should do nothing for now, while it evaluates the impact of its 11 previous increases. This is what the Fed was waiting for, a slowdown in jobs. The reality is that two head fakes have been reported in this direction, and this report of slow economic data may encourage investors to invest in the market.
Federal funds futures traders reduced the probability of a December rate hike to less than 10% and expect the first cut in borrowing rates to occur in May, according to CME Group tracking.
And although for the moment this economic decline is good news, The Federal Reserve fears that, if it continues to decline, it would require measures of monetary policy. Slow, controlled growth is something markets and the Federal Reserve are looking for in the current climate, but negative growth is not.
According to Michael Arone, chief investment strategist at State Street Global Advisors, investors eyeing falling interest rates, should be careful what they wish for, as the report gives no indication that this will happen at the moment.
Jobs and inflation may, or may not, stabilize and an aggressive reaction from the Federal Reserve is not in sight at the moment.
By Jeff Cox