Jobless Claims
In previous updates I’ve talked about how perception matters in terms of market movements. The latest economic report suggests that the economy added less jobs than had been previously reported.
What this means is the expectation is that rates will not need to be hiked or kept status quo. It opens the door for additional discussions regarding reducing interest rates at the next Federal Reserve meeting.
Perception drives markets. And if it is perceived that if employment is growing more slowly, it’s anticipated that inflationary pressures will be less evident in the economy. The Fed has been shooting for a soft landing and the latest number suggest it might be possible.
We are of the belief that rates will likely drift lower as the economy slowed. That appears to be happening now. We are investing based on that assumption.
It is possible our fixed income durations as inflationary pressures ease. Additionally, it’s entirely possible equities will receive a tailwind from this economic news as avoidance of recession is considered a positive for corporate earnings.
A recent article by the AP highlighted the latest from Washington. Excerpts are provided below.
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“The U.S. economy added 818,000 fewer jobs from April 2023 through March this year than were originally reported, the government said Wednesday. The revised total adds to evidence that the job market has been steadily slowing and likely reinforces the Federal Reserve's plan to start cutting interest rates soon.
The Labor Department estimated that job growth averaged 174,000 a month in the year that ended in March — a drop of 68,000 a month from the 242,000 that were initially reported. The revisions released Wednesday were preliminary, with final numbers to be issued in February next year.
The downgraded estimate follows a jobs report for July that was much worse than expected, leading many economists to suggest that the Fed had waited too long to begin cutting interest rates to support the economy. The unemployment rate rose for the fourth straight month, to a still low 4.3%, and employers added just 114,000 jobs.”
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