7 June 2024
If you are covering the latest employment data from the US, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“Just as economic data was pointing to some signs of softening in the US economy, the latest employment figures show an economy that exhibits no sign of pulling back just yet. Indeed, with average hourly earnings also continuing to trend upwards in the US, this data has the potential to take any rate cut by the Federal Reserve this year off the table.
“The Federal Reserve is in somewhat of a bind at the moment. The level of interest rates feels restrictive enough that it should be having an impact on economic activity, however, while the unemployment rate has ticked up, US businesses show little appetite to slow down. This is causing inflation to be stickier than hoped for, and with a ceiling seemingly reached on rates, there is not a lot more than can be done until the data begins to roll over.
“As a result, markets will not like this outcome, particularly given interest rates in Europe have now started to come down. As we head into pressure cooker of the presidential election campaign, the Fed will not want to be seen to being political in any way. Today’s data suggests the Fed is going to have to sit tight and wait a while longer before that first cut can be considered.”
