The U.S. Bureau of Labor Statistics released a report on Friday showing that the U.S. economy added 254,000 jobs in September, far exceeding the expected 150,000 and surpassing all economists' forecasts from media surveys. This marks the largest increase since March of this year. The unemployment rate unexpectedly declined, and the year-over-year wage growth rate increased. The Federal Reserve, which had previously cut rates by 50 basis points due to concerns about a weak labor market, has become the target of criticism. Wall Street heavyweights have expressed that the September jobs report will make the Federal Reserve quite uncomfortable, with major Wall Street banks下调ing their expectations for a Federal Reserve rate cut in November from 50 basis points to 25 basis points.

Former Treasury Secretary Summers: The 50 basis point cut in September was a mistake.

After the release of the non-farm data in September, former Treasury Secretary Larry Summers, known as the "U.S. high inflation whistleblower," stated in a post on X, "In hindsight, the 50 basis point rate cut in September was a mistake, although not a significantly impactful one." The jobs report confirmed suspicions that we are in a "high中性 interest rate environment," where monetary policy needs to proceed cautiously when cutting rates.

Advertisement

"No landing" and "hard landing" are risks that the Federal Reserve must address.

At the Federal Reserve's September meeting, policymakers expressed confidence in their control over inflation and shifted their focus to the labor market. The latest employment data has helped to alleviate some concerns, with investors now betting that the Federal Reserve will make a smaller 25 basis point rate cut at its November meeting. In contrast, Federal Reserve policymakers indicated last month that they preferred to cut rates by another 50 basis points in the two remaining meetings of the year.Former Soros Deputy Druckenmiller: The Federal Reserve May Be Cornered

Former Soros assistant and billionaire investor known as the "Wall Street genius," Stanley Druckenmiller, is concerned that the latest non-farm employment report may have cornered the Federal Reserve on future interest rate cuts.

Druckenmiller stated:

"I hope the Federal Reserve does not get trapped by forward guidance as it did in 2021, with GDP above trend, strong corporate profits, stock markets hitting historical highs, credit being very tight, and gold reaching new highs. Where is the tightening?"

Druckenmiller, who is now 71 years old, currently operates his family wealth management office, Duquesne Family Office. Analysts believe that these comments echo the warnings of other Wall Street figures that the market needs to maintain a cautious expectation for the pace and magnitude of central bank easing policies.

Earlier this week, at Grant's annual fall conference in New York, Druckenmiller expressed doubts about the Federal Reserve's decision to cut interest rates by 50 basis points at its September meeting. Larry Fink, CEO of the world's largest asset management company, BlackRock Inc., also stated earlier this week that the market is too optimistic about the Federal Reserve's easing policies, citing strong U.S. economic growth as the reason.

Major Wall Street Banks: Only a 25 Basis Point Cut Expected in November

 Economists at JPMorgan Chase and Bank of America predicted on Friday that the Federal Reserve will cut interest rates by 25 basis points in November, following a "strong" employment report for September, down from their previous forecast of a 50 basis point cut.

JPMorgan Chase's Chief U.S. Economist, Michael Feroli, expects a 25 basis point rate cut in November. He stated that, considering the Federal Reserve has already cut rates by 50 basis points in September, he believes the robust job market is the reason for the Fed to adopt a more cautious approach.

"Recent data showing a cooling labor market once raised concerns that it could evolve into a more serious issue, but after today's report, the expectation of a soft landing seems to be back on track. We believe that for the committee to deviate from the current gradual path of rate normalization, there would need to be a significant surprise in October or early November."

Bank of America now forecasts that the Federal Reserve will cut rates by 25 basis points in November and continue to cut rates by 25 basis points at each meeting until March 2025, after which they will cut rates quarterly for the remainder of the year. Aditya Bhave, a U.S. economist at Bank of America, wrote in a report on Friday.

"Since the Federal Reserve's 50 basis point rate cut in September, the data has been exceptionally strong, eliminating the need for another 50 basis point cut."

The bank also raised its forecast for the Fed's terminal rate range to 3%-3.25%. Bhave said, "Considering a range of data pointing to stronger productivity growth, the risks for this figure are skewed to the upside."

Scott Wren, Senior Global Market Strategist at Wells Fargo Investment Institute, said:

"This report tells the Federal Reserve that they still need to be cautious because the strong labor market and stubborn housing/residential data indicate that significantly reducing inflation in the short term will not be easy."