Economy

“Strong September job gains and upward revisions have for now calmed fears that labor demand might be too weak to prevent the unemployment rate from continuing to trend higher,” the strategists said in a note.Goldman’s recession probability had stood at 15% before the unemployment rate increased from 4.054% in June to 4.253% in July. The key factor behind the revision is the drop in the unemployment rate to 4.051% in September, which is slightly below the June level and under the threshold that triggers the “Sahm rule.”Akin to many investors, Goldman said it has closely monitored the balance between job growth and labor supply growth. While labor supply growth is expected to slow, it will remain elevated enough that 150,000 to 180,000 jobs per month will be necessary to stabilize the unemployment rate.Although trend job growth dipped below this range in August, it bounced back to 196,000 in September. Their job growth tracker, which incorporates both survey and hard data, is only slightly below that figure.”While the jobs numbers have been volatile, we think they can probably be taken at face value because we see no clear basis for further persistent negative revisions and the birth-death adjustment now looks reasonable,” the strategists said.”More broadly, we see no obvious reason for job growth to be mediocre at a time when job openings are high and GDP is growing strongly.”Goldman acknowledges that the labor market is still softer than it was before the pandemic. Measures of labor market tightness suggest the risks to the unemployment rate remain two-sided.However, the September decline in unemployment provides early evidence that the previous increase was likely driven by the temporary challenge of absorbing a surge in immigrant labor supply, which is now easing.According to Goldman’s team, the recovery in job growth supports the view that the Federal Open Market Committee (FOMC) is on a path toward 25-basis-point rate cuts. Strategists continue to project consecutive 25bp cuts, with a terminal rate of 3.25% to 3.5% by June 2025.”If job growth remains solid and the unemployment rate does not rise further, then where to stop and how quickly to get there will likely come up for the debate next year in the Fed’s framework review,” they added.They believe that a pause in the rate-cutting cycle is unlikely in the near future, as the federal funds rate remains elevated. Still, strategists note the possibility that the FOMC might proceed more cautiously as it approaches the appropriate terminal rate, adjusting the pace of cuts as necessary. More

“At present, I am not thinking of exploring this issue specifically,” Ishiba told parliament, when asked whether his government will consider raising the tax rate.Before winning the ruling party’s leadership race and being appointed premier, Ihiba had said he would beef up the taxation on investment income if he became prime minister.The tax on income from investments – imposed on capital gains on stock and property, dividends and interest payment on savings and Japanese government bonds – is uniformly set at 20%, below progressive tax rates on salaries of up to 45% in an effort to encourage investment.The flat-rate tax system helps lower the overall burden for high-income earners, who tend to earn more through investments. More

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TOKYO (Reuters) – Asian stocks rallied and the dollar reached a fresh seven-week peak on the yen on Monday after blowout U.S. labour data dispelled fears of a recession and spurred a sharp paring of rate-cut bets.Short-term U.S. Treasury yields rose after the closely watched non-farm payrolls report on Friday showed the economy unexpectedly added the most jobs in six months in September.Crude oil prices eased from a one-month peak even as Israel bombed targets in Lebanon and the Gaza Strip, with Monday marking one year since the Hamas attack that triggered the war.Japan’s Nikkei led regional equity gains with a 2% rally as of 0015 GMT, given additional momentum by the softer yen.Australia’s stock benchmark added 0.12% and South Korea’s Kospi gained 0.29%.Hong Kong’s Hang Seng had yet to open, and mainland Chinese stocks remain closed until Tuesday for the Golden Week holiday.MSCI’s broadest index of Asia-Pacific shares climbed 0.4%.U.S. Dow futures pointed 0.08% higher after the cash index closed at an all-time peak after the payrolls data on Friday.”The reaction in markets conveys what the key themes and risks for market participants are presently: economic growth, and its impact – for equities – on future earnings,” said Kyle Rodda, senior financial market analyst at Capital.com. “There’s also seemingly a revival of the U.S. economic exceptionalism trade.”The U.S. dollar pushed as high as 149.10 yen for the first time since Aug. 16 before last trading hands up 0.18% at 148.87 yen.Japan’s top currency diplomat, Atsushi Mimura, said on Monday that officials will monitor foreign exchange moves, including speculative trading.The euro eased 0.07% to $1.0971, slipping back towards Friday’s seven-week trough at $1.09515.Bets for a super-sized 50-basis-point rate cut at the Federal Reserve’s next policy announcement on Nov. 7 – which had been above 50% a week ago – were completely erased after the payrolls report.Instead, traders now lay 95% odds on a quarter-point cut, with a small chance that the policy rate stays unchanged, according to CME Group’s (NASDAQ:CME) FedWatch Tool.The two-year U.S. Treasury yield rose 1.7 basis points to 3.9488% on Monday, the highest in more than a month.Gold edged 0.1% lower to $2,849.29 an ounce, but remained not far from last month’s record peak of $2,685.42.Crude prices slipped following their biggest weekly gains in more than a year amid the mounting threat of a region-wide war in the Middle East.Brent crude futures lost 65 cents to $77.40 per barrel, while U.S. West Texas Intermediate crude futures declined 53 cents to $73.85 per barrel. More

SINGAPORE (Reuters) – Japan’s yen fell to its lowest in nearly two months and other major currencies too were grappling with losses early on Monday as the dollar extended a rally sparked by Friday’s strong U.S. jobs data and an escalation in the Middle East conflict.The yen fell marginally to hit 149.10, its weakest level since Aug. 16. But that came on top of a more than 4% decline last week, its biggest weekly percentage decline since early 2009.The dollar’s gains followed a U.S. jobs report that showed the biggest jump in jobs in six months in September, a drop in the unemployment rate and solid wage rises, all pointing to a resilient economy and forcing markets to reduce pricing for Federal Reserve rate cuts.”With rate cuts still being the default position, and when married to upbeat earnings expectations and China going hard on liquidity and fiscal, the equity bull case and the U.S. dollar get a shot in the arm,” said Chris Weston, head of research at Australian online broker Pepperstone.”While geopolitical headlines and the possibility of an energy supply shock remain a continued threat to sentiment, those set long of risk haven’t heard anything significantly market moving through the weekend and head into the new trading week feeling pretty good about the prospect of further upside.”In latest developments in the Middle East, Israel bombed Hezbollah targets in Lebanon and the Gaza Strip on Sunday ahead of the one-year anniversary of the Oct. 7 attacks that sparked its war. Israel’s defence minister also declared all options were open for retaliation against arch-enemy Iran. Brent crude oil futures were 0.7% lower on Monday, but rose more than 8% last week, the largest weekly gain since early January 2023. The dollar index measure against major rivals was flat. It rose 0.5% on Friday to a seven-week high, logging more than 2% gains for the week, its biggest in two years. The euro stood at $1.0970, down 0.06%.The yen’s underperformance has also to do with last week’s comments from new prime minister, Shigeru Ishiba, that stoked expectations that rate hikes in Japan are further away.U.S. 10-year Treasury yields were last up a basis point (bps) at 3.9905%, their highest in nearly two months. Yields dipped early last week when investors bought safe-haven Treasuries after Iran launched more than 180 missiles against Israel in escalating geopolitical tensions.Market expectations have swung to the extreme for the Federal Reserve to do just a 25 bps cut in November, rather than 50 bps, following the jobs data. They now price in a 95% chance of a quarter point cut, up from 65% in the middle of last week, and a 5% chance of no cut at all, according to CME’s FedWatch toolSterling was also flat around $1.3122, nursing last week’s 1.9% drop, its steepest fall since early 2023.Bank of England Chief Economist Huw Pill said on Friday the central bank should move only gradually with cutting interest rates, a day after governor Andrew Bailey was quoted as saying the BoE might move more aggressively to lower borrowing costs. More

TOKYO (Reuters) -Japan’s top currency diplomat, Atsushi Mimura, issued on Monday a warning against speculative moves on the foreign exchange market as the yen fell below 149 per dollar.”We will monitor currency market moves including speculative trading with a sense of urgency,” Mimura told reporters, reviving a verbal warning tactic that his predecessor, Masato Kanda, frequently used.Mimura declined to comment on the specifics of the current market situation.The yen depreciated to 149.10 versus the dollar in early trading on Monday, the weakest since Aug. 16, after a surprisingly strong U.S. jobs report for September led traders to cut bets that the Federal Reserve will make further large interest rate cuts.The yen has also been under pressure since new Japanese premier Shigeru Ishiba stunned markets when he said the economy was not ready for further rate hikes, an apparent about-face from his previous support for the Bank of Japan’s unwinding decades of loose monetary policy. More