Non-farm payrolls far exceed expectations, sparking Wall Street discussions on "no more rate cuts this year"
TechFlow Selected TechFlow Selected
Non-farm payrolls far exceed expectations, sparking Wall Street discussions on "no more rate cuts this year"
Wall Street veteran Ed Yardeni believes the Federal Reserve's monetary easing this year may already be over, and given the market's aggressive pricing for rate cuts, any additional easing could increase the probability of a stock market crash.
Navigating Web3 tides with focused insightsAuthor: Li Xiaoyin, Wall Street Insights
Due to September's nonfarm payroll data significantly exceeding expectations and sending stronger signals of an economic "soft landing," market expectations for rate cuts this year have sharply narrowed.
Data released overnight showed that U.S. nonfarm payrolls increased by 254,000 in September—far surpassing forecasts—while the unemployment rate declined to 4.1%, the first drop in nearly a year and also below expectations.
Following the data release, traders abandoned bets on a 50-basis-point rate cut in November, now pricing in less than 100 basis points of total easing over the Fed’s next four meetings; both Bank of America and JPMorgan reduced their expected size of a November rate cut from 50 basis points to 25 basis points.
Is Rate Cutting Over for the Year?
Several analysts said that due to the strong September jobs report, the Federal Reserve may pause rate cuts at its November meeting.
Glen Smith, Chief Investment Officer at GDS Wealth Management, stated:
"Friday’s employment report was stronger than expected, giving the Fed flexibility to either cut rates by 25 basis points at the November 7 meeting—or choose to hold steady in November and reconsider easing in December."
Wall Street veteran Ed Yardeni said the Fed’s monetary easing for the year may already be over, as Friday’s robust jobs report highlighted the economy’s persistent resilience.
Former Fed Governor Randy Kroszner similarly believes the Fed could opt not to cut rates if data warrants it:
"If data continues to outperform like this, the Fed might decide not to cut rates at all."
Yardeni argues that aggressive market pricing for rate cuts has accumulated risks, making the Fed need to be more cautious in its decision-making.
The risk, he says, is that additional stimulus could fuel investor exuberance, setting the stage for a painful market event:
"Any further rate cuts increase the stock market bubble and raise the likelihood of a 1990s-style melt-up."
In the 1990s, excessive valuations in tech stocks led to a market bubble burst, causing the S&P 500 to lose one-third of its peak value.
In Yardeni’s view, even the 50-basis-point cut in September was “unnecessary”:
"With the economy booming and the S&P 500 hovering near record highs, the Fed’s decision to cut rates by 50 basis points—typically reserved for recessions or market crashes—was unnecessary."
Beware Inflation Risks Behind Wage Growth
Notably, wage growth in this nonfarm payroll report is another key indicator worth watching.
The report showed average hourly earnings rose 4% year-over-year in September—the highest since May—and above the 3.8% forecast. On a month-over-month basis, wages increased 0.4%, exceeding the 0.3% estimate and matching the prior month’s figure.
Kroszner pointed out that if wage growth does not moderate and productivity growth remains insufficient, the Fed may need to take more aggressive action to control inflation.
He explained that high wage growth could lead to higher consumer prices, thereby pushing up inflation. Even without raising interest rates or using other monetary tools to directly curb wage growth, the Fed may still need tighter measures to contain inflation, which could negatively impact the labor market.
October Jobs Data Could Be Decisive
Prior to the Fed’s next meeting on November 7, a wave of employment and inflation data will shape the trajectory of monetary policy.
Ian Lyngen, Head of U.S. Rates Strategy at BMO Capital Markets, noted that if October’s nonfarm payroll report remains relatively strong and inflation proves sticky, the Fed may temporarily pause rate cuts.
In a note to clients, he wrote:
"The latest jobs data suggest the Fed may be rethinking a November rate cut... It’s worth briefly considering what data the Fed would need next month to pause easing."
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
