November Jobs Report Due Friday as the Fed's Powell Confirms Slower Pace of Rate Hikes

Speaking Wednesday at a Brookings Institution event, Federal Reserve Chair Jerome Powell more or less confirmed what has been suggested for weeks – that this month the central bank was going to ratchet back the pace of interest rate hikes from 75 basis points to 50 basis points.

Equity markets soared on the news, led by the Nasdaq’s 4.5% advance. Bitcoin (BTC) rallied as well, briefly topping $17,000 from the mid-$16,000 area (it’s trading at $16,900 at press time). The rallies were somewhat surprising as bets on a smaller-than-usual rate hike in December barely changed after Powell’s comments on Wednesday.

According to the CME’s FedWatch Tool, after Powell's address market participants saw a 77% chance of a 50-basis point move coming out of the Federal Open Market Committee's mid-December meeting, up a hair from 76% prior to the Fed chair’s speech.

The small change signals that traders may be waiting for more data from the jobs report on Friday.

November’s payroll report from the Labor Department on Friday at 8:30 a.m. ET is expected to show 200,000 added jobs, according to economists polled by FactSet. That would be down from 261,000 in October and the slowest monthly increase in hiring in two years.

“I don’t think a weak report is a non-event,” said Bob Iaccino, Path Trading Partners co-founder and chief market strategist. “The probability hasn’t really moved much, which tells me that 50 basis points is not truly priced in yet,” he added.

While a slowing pace of job growth might signal the Fed is getting its wish of a weaker economy and possibly less inflationary pressure, Powell on Wednesday reminded it’s not necessarily enough. He noted another survey showing there remains a lofty 1.7 job openings for every person searching for a job.

“So far we have seen only tentative signs of moderation of labor demand,” Powell said, pointing out only “modest” declines in wage growth that remains well above where the Fed would like it to be.

“To be clear, strong wage growth is a good thing,” he said. “But for wage growth to be sustainable, it needs to be consistent with 2% inflation.”