Non-farm payrolls underwhelm at last; Fed stays firm on work to be done
Corporates | Kennett Square, PA
Job growth stuns in the reverse direction for a change, coming in below expectations for June. Fed officials keep a busy speaking schedule as they add details to their plans but remain consistent overall in their messaging.
Employment growth begins to peter out
After months of underestimation by analysts, employment growth finally started to slow its pace, with the Bureau of Labor Statistics announcing Friday that the U.S. economy added 209,000 jobs this June. This was below the expected 225,000 jobs that were forecasted and also marks the smallest monthly increase since December 2020. That said, an addition of over 200,000 jobs isn’t yet an indication of weakness in the job market, as it still more than doubles the amount needed to keep pace with the growth of the working-age population (~70,000-100,000 per month). The job additions came primarily from growth in the government and healthcare sectors. Additionally, June unemployment figures came in at expectations, declining slightly to 3.6%.
Markets took this news in stride, as it was accompanied by growth in average hourly earnings of 0.4% on a monthly basis and 4.4% compared to this time last year. This growth could indicate further inflationary pressures, but next week’s Consumer Price Index (CPI) report will be a better indicator.
June FOMC meeting minutes, Fed speakers add color to the path forward for rates
Last Wednesday brought the publication of the meeting minutes from the FOMC’s June session. The minutes are consistent with the language being used in recent press conferences by Fed officials, reiterating that most (if not all) of the Committee is expecting at least one additional rate hike in 2023. New York Federal Reserve President John Williams made clear in an interview Wednesday afternoon that there is “more work to do,” while Dallas Federal Reserve President Lorie Logan emphasized Thursday that the current state of the labor market indicates a need for “more-restrictive monetary policy.”
As of Friday morning, markets were overwhelmingly predicting a 25 basis point rate hike for the upcoming July FOMC meeting. However, only one rate hike is currently priced in for the rest of the year, despite the FOMC’s dot plot foreseeing two hikes in the coming months.
This week brings the release of June CPI data on Wednesday, as well as June PPI data on Thursday. There will also be commentary from four different Fed presidents this week in addition to remarks from Fed Vice Chair Michael Barr on Monday.
With the June 30 sunset of LIBOR, many corporations are completing their transition activities. This FAQ article answers questions about what happens now to LIBOR loans and hedges. If you need further support or have additional questions, please contact us.
Don't miss this week's webinar, "Communicating Your Hedging Program's Success Through Key Performance Indicators."
Subscribe to receive our market insights and webinar invites
Ready to talk about your hedging program?
Contact a Chatham expert
Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.23-0170
Our featured insights
Fed minutes recap and market outlook: Higher for longer
In what was a relatively light week on the economic data side, the market looked to the highly anticipated January Federal Open Market Committee (FOMC meeting) minutes for any insight on what the Fed will do next.
Mixed sentiment in markets as inflation outpaces expectations
The most recent CPI reading strengthened fears that inflation will persist at its current levels, leading markets to reevaluate the timing and quantity of upcoming interest rate cuts.
Navigating rate cuts: Fed caution vs. market optimism
A relatively quiet week on the economic data front made for a loud week of Fed speak. Fed officials continue to reiterate that the FOMC does not want to act too soon or too quickly regarding rate cuts. The market, on the other hand, outpaces the Fed’s path.
Interest rate collars gain appeal as rate cut uncertainty ensues
Interest rate markets remain uncertain within the United States. Although the market expects rate cuts, continued strength in the U.S. economy and labor market provides the potential for inflation to re-accelerate or remain elevated. As a result, corporates with floating-rate debt are considering...
Economic indicators continue to show a strong U.S. economy
The fourth quarter of 2023 included strong consumer spending and manufacturing growth, but concerns continue to linger about the sustainability of spending tied to a decreasing savings rate. The Federal Reserve is expected to maintain rates in their first 2024 meeting, with potential cuts later...
Risk exposures outpacing hedging programs for corporates, according to Chatham Financial’s State of Financial Risk Management Report
Extensive research of publicly held U.S. corporations provides insight into risk management strategies and trends in the marketplace.
Fed stays firm, consumers keep spending amid rising shipping costs from Red Sea tensions
Fresh retail sales data showed that consumers have yet to be scared off by higher prices. Across the Atlantic, shipping concerns have arisen as unrest in the Red Sea has driven prices up and forced companies to redirect cargo ships around the Cape of Good Hope.