Strong Job Growth Alters Fed Rate Cut Expectations

Goldman Sachs has reduced the probability of a U.S. recession to 15% following a stronger-than-expected September jobs report, which revealed a gain of 254,000 nonfarm payrolls and a drop in unemployment. This positive economic data has led major brokerages like J.P. Morgan and BofA Global Research to predict a smaller 25 basis point rate cut by the Federal Reserve in November, aligning with similar forecasts from Goldman Sachs and others. The robust job market figures have also significantly altered traders' expectations, with the chance of a 50 basis point rate cut dropping to just 8%. President Biden has highlighted this economic strength in recent public statements, contrasting with Republican skepticism about the jobs numbers. Additionally, the resolution of a significant port workers' strike has alleviated potential economic disruptions, further strengthening the administration's economic standing ahead of upcoming elections.