Be careful what you wish for!
Weekly Bond Commentary
The Federal Reserve’s patience seems to be paying off, as the economy appears to be slowing. The Fed met last week, and as expected, did not change interest rates. Fed Chair Powell reiterated the view that the FOMC’s policy is restrictive, and the full effects of the rate hikes have yet to be felt. Patience is key, as inflation has moderated but remains above the 2% target. The Fed will proceed carefully, but shows no indication of cutting rates any time soon.
The jobs picture made clear that policymaker’s work may be getting easier. Weekly jobless claims inched a little higher, to 217,000, and continuing claims are now up 30% year-over-year. Monthly job gains slowed to 150,000, from 297,000 in September, as the unemployment rate ticked up from 3.8% to 3.9%. There were approximately 30,000 auto workers on strike during October, depressing job gains, but the two prior months saw a 101,000 downward revision in job gains, offsetting some of the labor market euphoria.
The unemployment rate has now risen 0.5% since January, an increase that has typically led to recessions in the past, and household employment fell 348,000 in October. Average hourly earnings eased lower, from 4.3% over the last year to 4.1% in October, and average weekly hours worked ticked a little lower, from 34.4 to 34.3 hours. Hardly a gathering storm, but all these indicators point to a slower fourth quarter GDP growth than the robust 4.9% of the third quarter.