The case for an end to the Federal Reserve’s interest rate hikes continues to build for investors.
On Friday, the October jobs report showed 150,000 jobs were added to the US economy while the unemployment rate hit its highest level since January 2022.
The labor market slowdown is a welcome sign for the Federal Reserve, which has noted it is “likely” that more softening in the labor market will be needed to keep inflation on its downward trajectory.
The jobs report adds to the growing reasons investors see the Fed stopping its rate hiking campaign. After the central bank held rates steady on Wednesday, investors largely interpreted Fed Chair Jerome Powell’s commentary to indicate the Fed won’t be hiking again in 2023.
“The overall weakening in employment demand and wage growth supports our view that the Fed is done raising rates for this cycle,” Nationwide chief economist Kathy Bostjancic wrote in a note to clients on Friday.
Despite the rally in markets, the Fed hasn’t made a clear decision on what’s next for rate hikes and hasn’t discussed cutting rates yet, per Powell. The Fed chair highlighted Friday’s labor report as one of several key data points, including another labor update and two inflation prints, that will come before the December meeting.
“That’s the question we’re asking, is should we hike more?” Powell said on Wednesday.