New data signals likely further economic slowdown, raising the prospect of another move by the central bank
New estimates by payroll processor ADP showed US employers appeared to cull thousands of jobs a week in the second half of October, signaling a potential further economic slowdown as the Federal Reserve weighs up a rate cut next month.
Those private-sector reports have taken on new significance amid the government shutdown, which means the Bureau of Labor Statistics is no longer releasing its own economic data – for now at least.
And the latest figures point to more than 11,000 weekly jobs being cut by US employers toward the end of last month even despite another ADP report last week showing a net monthly gain of tens of thousands of jobs.
The Fed, which recently cut rates for the first time this year, is keeping a close eye on economic data as it debates whether to lower its funds rate again when it meets in December. Market analysts currently see another rate cut as likely.
Financial markets rebounded Tuesday as hopes grew that an end to the weeks-long standoff between Democrats and Republicans in Washington could be in sight.
That impasse has seen government grind to a halt and complicated the Fed’s task of monitoring how the economy is faring and whether a rate cut is warranted.
But in recent weeks, many Fed officials have given little indication that they would be opposed to another rate cut in December.
San Francisco Fed president Mary Daly said last week that she would keep an “open mind” about further action, but backed the decision to cut by 25 basis points in October. “I thought it was appropriate to take another bit off the policy rate,” she said.
“We need to continue to put downward pressure on inflation and keep our policy modestly restrictive, but not hold the reins so tight that we injure the labor market unnecessarily and give people lower inflation but fewer jobs.”
This week, Daly highlighted the danger of holding rates where they are for too long, particularly with inflation showing no sign of spiking.
And Stephen Miran, a recent Fed appointee who’s a noted ally of President Trump, yesterday reiterated calls for a half-point cut when decisionmakers meet next month.
“Labor-market data have come out with the labor market continuing in the trajectory it was on, which is one of gradual softening,” Miran said in an interview with CNBC.
The Fed’s final decision of the year is scheduled for December 9-10.
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