MNI US Macro Weekly: 25bp Cuts Favored But Election Looms

MNI (LONDON) - Executive Summary:

• The nonfarm payrolls report was far softer than expected in October at just 12k (cons 100k) along with a heavy, and highly important, two-month downward revision of -112k, mostly concentrated in August. 
• The strike impact was relatively clear-cut but there are far more question marks over the extent of storm disruption even if the establishment survey saw very few fingerprints of such.
• Still, the unemployment rate was broadly as expected at 4.15% as it remained below the 4.25% seen in July and is still below the 4.4% the median FOMC member forecast for Q4.
• Real GDP growth technically surprised a touch lower with a strong 2.8% annualized in Q3 but the details were more encouraging than analysts expected with particularly solid domestic demand. Very early Q4 tracking suggests scope for overshooting the FOMC’s real GDP Q4 Y/Y forecasts.
• We view labor trends and the calendar as making 25bp cuts in Nov and Dec FOMC meetings as the base case now. Fed Funds show similar with a cumulative 46bp of cuts for close to the median FOMC dot implying 50bp of cuts.
• Terminal rates have seen stronger climbs on the week though, with SOFR implied yields rising 14bps on the week through 2026 contracts, aided by additional spillover from a particularly abrupt increase in BoE terminal rate expectations after the UK Budget.
• Ahead, the US Presidential Election on Tuesday and the FOMC decision unusually on a Thursday are two major risk events in an otherwise light US calendar. 

PLEASE FIND THE FULL REPORT HERE: US week in macro_241101.pdf