US jobs data eyed ahead of next week’s Fed rate decision

• US jobs report the next major event
• Powell hints at less hawkish Fed view
• JOLTS, ISM and jobless claims eyed

The next couple of weeks could be massive for financial markets going into 2024, with a range of data from the US in the coming days setting us up nicely for the Fed meeting on the 13th.

The standout event is the jobs report on Friday, with the Fed still seemingly of the view that getting inflation back sustainably to target will require some more slack in the labor market. Another weaker report, especially one paired with 0.2% monthly wage growth, could further fuel the belief that not only is the tightening cycle over but rate cuts may not be far away.

Fed Chair Jerome Powell’s comments on Friday ahead of the start of the blackout period appeared to suggest the central bank needs no more convincing. In a short time, the narrative has shifted from further tightening likely being necessary and rates remaining higher for longer to being prepared to tighten further if it becomes appropriate, suggesting the view on the FOMC is that it no longer is.

The dot plot next week is now far less about whether the committee is anticipating another hike, rather when they expect the first cut. Markets are pricing a March cut as slightly more likely than not and by May as almost certain. Even with a late pivot, that doesn’t leave the Fed much time so we’ll need to see a stark difference in next week’s forecasts compared with September and an acknowledgement of a rate cut soon.

There are plenty of other US releases this week including JOLTS job openings and the ISM services PMI tomorrow, ADP employment figures on Wednesday, and jobless claims on Thursday. Today is quieter with markets a little subdued so far in Europe.

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