Unemployment Jumps to 4.6% – Will More Cuts Come?

Economic Overview - The employment report indicates a cooling economy, with a loss of 105,000 jobs in October followed by a modest gain of 64,000 in November, primarily driven by the healthcare sector [1][2] - The unemployment rate rose to 4.6% in November, the highest level in over four years, surpassing the Federal Reserve's projection of 4.5% [2][3] Federal Reserve Policy Implications - The rising unemployment rate may prompt policymakers to ease financial conditions, although the Fed is monitoring a broader mix of inflation and growth data [4][6] - The Fed's current stance remains patient and data-dependent, with no immediate changes expected despite the recent job data [6][7] Leadership Transition and Its Impact - The potential emergence of a "shadow chair" could influence rate policy more than individual jobs reports, with Kevin Hassett and Kevin Warsh as leading candidates for the next Fed chair [8][10] - Hassett is viewed as a growth-friendly candidate likely to support earlier rate cuts, while Warsh is seen as more hawkish but could still cut rates later if economic conditions deteriorate [11][22] Market Reactions and Future Expectations - The likelihood of rate cuts by spring is higher than current market pricing suggests, with traders reassessing expectations based on the evolving economic landscape [8][25] - The distinction between Hassett and Warsh may not significantly alter the trajectory of rates but will influence the timing and manner of potential cuts [24][25]