Today’s worse than expected nonfarm payroll figure has almost totally justified Janet Yellen’s recent caution by not raising rates at last month’s FOMC meeting and puts the chances of a 2015 rate hike from the Federal Reserve into serious doubt. The headline figure of 142k, much lower than the 200k expected also included a downward revision to the previous month and caught investors totally off guard. As if that wasn’t enough the average earnings data disappointed coming in at 0.0% month-on-month all culminating in a serious readjustment of rate expectations in the bond market, which saw US Treasuries spike and the dollar plunge.
The Fed has recently been focusing a great deal on the threats from outside the US economy that could cause them to delay the timing of the first rate hike and subsequent tightening cycle, namely the slowdown in China, somewhat shifting its emphasis on the domestic economy, but today’s bout of employment data collectively has shifted the focus firmly back on the US. Anyone thinking there was a chance of a move this month can firmly rule it out and December is now looking all the more unlikely unless we see a couple of very impressive nonfarm payroll figures in November and December.