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Outlook: Modest job growth is not the same thing as a labor market that is no longer tight. It’s still tight, just not suffocating. The ADP private sector estimate today is going to hit the market like a pipe bomb almost no matter what it says. That’s because traders are seeking hot news to trade on and any direction will do. 

The current forecasts have a gain of 130,000 private sector workers in November, with the full-economy nonfarm payrolls at 180,000. Reuters notes job growth this year is 2.4 million so far, vs. 4.26 million at this point in 2022. Notice this fails to take Covid effect into account.

Analysts are already making noise about how jobs are concentrated in one sector or another, the diffusion among different education, race and sex classes, and other breakdowns. These probably fall into the “true but not useful” category.

Off on the side is the occasional story about whether QT is affecting much of anything as the Fed removes liquidity from the financial sector. Every once in a while the nerdy types like to estimate when conditions have returned to “normal,” but beware that definition.

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Forecast: We warned that next up on the calendar is volatility as the rate-cut camps slug it out. These are “multiple cuts and starting soon, “and “two cuts starting later.” It looks like the multiple cuts gang is winning again, but with the twist this time that other central banks are going to be cutting, too, and likely sooner. This is about the only way to reconcile the current yield picture and the mixed outcomes in currencies.

Here's the problem: if ADP has a soft number, as seems likely, it will force analysts and traders alike to adjust their NFP numbers and presumably also their rate cut betting. This can accelerate the cuts expectation—as the Fed is seen as striving to fend off recession. The only rescue would come from higher ADP and NFP numbers that would imply the Fed needs to stay high for longer, an idea that has been rejected by most. It might even have been rejected by the Fed, which seems to acknowledge the disconnect between jobs and inflation.

And let’s be sure to note that all this labor market data is NOT inflation data, and in theory, the Fed is supposed to be watching inflation, no matter what secondary theories get involved. Bottom line, we do not like this environment. It’s a little crazy and not to be trusted.


This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes.

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This morning FX briefing is an information service, not a trading system. All trade recommendations are included in the afternoon report.

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