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U.S. employment decline strengthens case for a December rate cut…"13,500 jobs lost per week" [Fed Watch]
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- ADP said U.S. private-sector job losses averaged 13,500 per week over the past four weeks.
- The need for a rate cut is gaining ground within the Fed, bringing the possibility of a cut at the December meeting back into focus.
- Goldman Sachs expects the Fed to cut the policy rate in December and then make two additional cuts of 0.25 percentage points each in 2026.
- The article was summarized using an artificial intelligence-based language model.
- Due to the nature of the technology, key content in the text may be excluded or different from the facts.
Labor slowdown clear over four weeks
Calls for a December cut gain strength within the Fed
The pace of job losses in the U.S. private sector has clearly accelerated over the past four weeks.
Private employment data firm ADP said in its weekly employment update released on the 25th (local time) that private firms cut an average of 13,500 jobs per week over the past four weeks. This is a sharp deterioration from the 2,500-per-week decrease reported one week earlier.
With the government shutdown continuing and major agencies such as the Bureau of Labor Statistics (BLS) facing disruptions to their data releases, alternative data like ADP are playing a key role in gauging the economic situation. Government agencies responsible for employment reports and GDP have issued revised publication schedules, but key data such as the monthly nonfarm payrolls (NFP) will not be released until December.
Accordingly, the U.S. central bank (Fed) will have to make its assessment at the December 9-10 meeting without access to many of the usual economic data. As Fed officials have increasingly voiced the need for additional rate cuts, markets are again pricing in the possibility of a rate cut at the December meeting.
Jan Hatzius, chief economist at Goldman Sachs, wrote in a client memo, "Considering the schedule for the next employment report (Dec. 16) and the CPI (Dec. 18), there is little to prevent a rate cut on Dec. 10."
Hatzius forecast that if government statistics resume, "alternative indicators will show that job losses occurred again in October." This contrasts with the BLS's report last week of a 119,000 increase in employment in September (above expectations).
Goldman Sachs expects that after the Fed cuts the policy rate at the December meeting, it will implement two additional cuts of 0.25 percentage points each in 2026.
New York=Shin-young Park, correspondent nyusos@hankyung.com
