Labor Market - U.S added 64 thousand jobs in November [1] - The unemployment rate rose to 4.6% [1]

JUST IN: 🇺🇸 US unemployment rate rises to 4.6%, highest since September 2021. ...

U.S. unemployment rate for November came in at 4.6%, compared with expectations of 4.4%. U.S. seasonally adjusted nonfarm payrolls increased by 64,000 in November, versus an expected 50,000. ...

RT Bloomberg Opinion (@opinion)JOBS DAY 🚨*US NOV. UNEMPLOYMENT RATE 4.6%; EST. 4.5%*US OCT. NONFARM PAYROLLS FALL 105K M/M; EST. -25KLive analysis:https://t.co/fbjzWB1IjJ ...

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the economic activity data from China for November, highlighting significant misses in market expectations across various sectors, particularly retail sales and industrial production [1][2][3]. Core Insights and Arguments 1. **Industrial Production (IP)** - IP growth decreased to **4.8% year-on-year** in November from **4.9%** in October, falling short of forecasts (GS: **5.1%**, Bloomberg consensus: **5.0%**) [2][8]. - Sequentially, IP showed a **0.5% month-on-month** increase after seasonal adjustment, contrasting with a **-0.4%** decline in October [8]. - The slowdown in IP was primarily driven by reduced output in the automobile and utilities sectors, which outweighed gains in special equipment and pharmaceuticals [8]. 2. **Fixed Asset Investment (FAI)** - FAI contracted by **-2.6% year-to-date** year-on-year in November, worsening from **-1.7%** in October [3][9]. - On a single-month basis, FAI fell by **-10.7% year-on-year** in November, slightly improving from **-11.4%** in October [9]. - The decline in FAI is attributed to statistical corrections by the NBS and ongoing issues in the property sector [9]. 3. **Retail Sales** - Retail sales growth significantly slowed to **1.3% year-on-year** in November, down from **2.9%** in October, missing expectations (GS: **2.3%**, consensus: **2.9%**) [6][11]. - The decline was broad-based, with notable drops in auto sales (-8.3%) and home appliances (-19.4%) [11]. - The earlier start of the "Double 11" Online Shopping Festival distorted demand, pulling some sales from November into October [11]. 4. **Services Industry Output** - The Services Industry Output Index growth moderated to **4.2% year-on-year** in November from **4.6%** in October, indicating a slowdown in the services sector [12]. 5. **Property Market** - The property market continued to show weakness, with new home starts and completions contracting by **-27.6%** and **-25.3%** year-on-year, respectively [13]. - Property sales volume fell by **-17.0%** and value by **-24.6%** in November, reflecting ongoing challenges in the sector [13]. 6. **Labor Market** - The nationwide unemployment rate remained stable at **5.1%** in November, with the youth unemployment rate for ages 16-24 declining slightly to **17.3%** [14]. 7. **GDP Growth Forecast** - Incorporating October-November data, there is a small downside risk to the Q4 real GDP growth forecast of **4.5% year-on-year**, with a sequential improvement in December activity needed to achieve a **5%** full-year growth [15]. Additional Important Insights - The report emphasizes that the recent slump in economic indicators should not be over-interpreted, as statistical corrections have played a significant role alongside fundamental economic challenges [1][9]. - The data reflects broader economic trends in China, including the impact of "anti-involution" policies and a prolonged downturn in the property market, which are critical for investors to consider [1][9].

Summary of Key Points from the December FOMC Meeting Industry Overview - The document primarily discusses the Federal Reserve's monetary policy decisions and economic outlook, impacting the financial services and investment banking sectors. Core Points and Arguments 1. **Rate Cut Announcement**: The Federal Reserve reduced the target range for the federal funds rate by 25 basis points to 3.5-3.75% with a focus on data dependency for future adjustments [6][9][10] 2. **Dissenting Opinions**: There were three dissents during the meeting; two members favored holding rates steady while one member advocated for a larger 50 basis point cut [6][20] 3. **Labor Market Concerns**: Chair Powell indicated that the labor market is showing signs of cooling, with unemployment rising by 0.3 percentage points since June [26][30] 4. **Inflation Outlook**: The Fed noted a slight decrease in inflation pressures, particularly in services, while goods inflation remains influenced by tariffs [28][29] 5. **Future Rate Cuts**: The Fed is expected to consider further cuts in January and April, contingent on labor market stability and inflation trends [9][30][34] 6. **Economic Projections**: The Fed upgraded its growth projections for 2026 and 2027, reflecting a more optimistic outlook despite ongoing risks [35][37] 7. **Reserve Management Purchases**: The Fed will initiate purchases of Treasury bills at a pace of $40 billion per month to maintain ample reserves, which is distinct from quantitative easing [12][15][77] 8. **Market Reactions**: The announcement led to a positive response in agency mortgages and a rally in Treasury yields, indicating market confidence in the Fed's approach [58][97] Additional Important Content 1. **Data Dependency**: The Fed emphasized a return to a data-dependent approach for future rate adjustments, raising the bar for further cuts [16][24] 2. **Unemployment Rate**: The unemployment rate is now viewed as being above the longer-run estimate, which could signal potential concerns for future economic stability [18][19] 3. **Balance of Risks**: The Fed sees risks to growth and inflation as more balanced than in previous assessments, indicating a shift in outlook among FOMC members [37][39] 4. **Trade Ideas**: Recommendations for investors include maintaining long positions in UST 5-year notes and entering buy contracts for FFJ6, reflecting expectations of future rate cuts [69][75] 5. **Housing Market Challenges**: Powell acknowledged ongoing challenges in the housing market, suggesting that a 25 basis point rate cut may not significantly impact housing demand due to low supply and existing low-rate mortgages [101]

Core Viewpoint - The discussion centers around the Federal Reserve's approach to interest rates, inflation, and the labor market, highlighting a divergence in opinions among Fed officials regarding the timing and necessity of rate cuts. Group 1: Federal Reserve's Interest Rate Decisions - The Kansas City Fed president expressed dissent against a rate cut, citing concerns over high inflation and an imbalanced labor market [1][3][4] - There is a belief that while inflation may eventually decrease, it is premature to assume that current inflation trends are transitory, advocating for a cautious approach to rate cuts [4][11][12] - The Fed president anticipates that rates could be lower by the end of 2024, but emphasizes the need for more data before making significant changes [10][32] Group 2: Labor Market Analysis - Current job market data indicates stability in unemployment and layoff rates, suggesting that a rapid deterioration in the labor market is unlikely [5][9][34] - The hiring rate is low, but the layoff rate is also low, indicating a unique situation of low hiring and low layoffs, which may reflect uncertainty rather than a slowdown [6][9] - Concerns were raised about the accuracy of monthly payroll data due to factors like immigration and retirements, complicating the understanding of the labor market's health [6][7][8] Group 3: Inflation Concerns - Inflation has remained above the target for over four years, with recent data showing disturbing trends in services inflation, which is typically more persistent [11][18][31] - The Fed president is cautious about assuming that inflation will decrease solely due to external factors like tariffs, stressing the need for observable data to support such claims [12][14][32] - Market-based measures of inflation expectations appear more stable than consumer survey measures, providing some comfort regarding future inflation trends [31][32]

Monetary Policy & Inflation - A Kansas City Fed president dissented due to inflation being too high and a largely imbalanced labor market [2] - The speaker has been saying for months that rates will be able to be a fair bit lower than they are today for 2026, but is uncomfortable front loading too many rate cuts and assuming that what we've seen in inflation be transitory [4] - The speaker wants evidence that tariffs coming off next year will cause inflation to fall, as the theory sounds like the argument of 2021's "transitory" inflation [13] - The speaker is one of the most optimistic people for one year from now about how far rates can go down, more than the median in 2026 [15] - The speaker wants to get evidence that inflation is going to be temporary, because there were some disturbing readings on services before the lights went out [17] - The speaker says that inflation has been above the target for four and a half years, and it's rising [20] Labor Market - Most measures of the job market have been pretty stable, and the chance that things in the job market would fall apart rapidly in the within 1 to 2 months before we would revisit this again, feel relatively low [5] - The unemployment rate is ticking up from 4% at the beginning of the year to 4040 basis points [10] - If the unemployment rate is for four and a half or under and stays there stably as long as it's coupled with some of these other rates, the vacancy rate, the hiring rate, the layoff rate, if those show stability [35] Fed Operations - The decision to come back into the market and purchase $40 billion of bills is a technical adjustment, not QE, intended to allow rate control, not to influence monetary policy [27] - The balance sheet is growing, but in an ample reserves regime, it's supposed to be a share of something, a share of bank deposits, a share of GDP [29]

Treasury yields a little higher this morning after dipping post Fed. They were up, they were down, back up again to 416 for the 10 year, the two years at 353. And joining us right now with his insights on the bond market and the Fed's decision on rates this week is Mark Cabana.He's head of US rate strategy at Bank of America Securities. And Mark, big week. >> It was >> heard a lot from the Fed.We're still trying to figure out what comes next. Um it's a split Fed at this point and we're going to probably hea ...

Core Viewpoint - The Federal Reserve is currently experiencing a divided stance among its members regarding interest rates, influenced by upcoming economic data and the recent government shutdown that has delayed critical reports [2][3][4]. Group 1: Federal Reserve's Position - The Fed is facing challenges in providing clear guidance due to a backlog of economic data caused by the government shutdown, with significant reports on jobs, CPI, and retail sales expected soon [4][5]. - There is a concern about the unemployment rate, which is projected to rise to 4.5%, and any increase beyond that could shift the Fed's tone towards a more cautious approach [6][7]. - The market currently anticipates that the Fed has concluded its rate hikes, but if unemployment continues to rise, the Fed may need to adjust its strategy, potentially leading to rate cuts [7][8]. Group 2: Economic Data and Projections - The upcoming economic data, particularly the unemployment rate, is critical for the Fed's decision-making process, as hiring has slowed and the labor market remains a concern [5][6]. - The Fed's projections indicate a cautious outlook, with expectations that inflation will decrease as tariff effects dissipate, which could allow for future rate cuts [9][10]. Group 3: Treasury and Market Dynamics - The Fed's recent actions, including large-scale asset purchases, are aimed at stabilizing money market rates rather than signaling a shift towards quantitative easing [13][15]. - The Treasury's strategy of issuing more short-term T-bills while reducing long-term issuance is seen as a way to manage duration risk in the market, which aligns with the Fed's objectives [16][18]. - The combination of actions from both the Fed and the Treasury is expected to ease financial conditions, although the Fed maintains that its actions are independent of broader asset price movements [19][20].