September non-farm payroll data: How do Wall Street and heavyweight market players view it?

The U.S. Bureau of Labor Statistics released a report on Friday showing that the U.S. added 254,000 jobs in September, far exceeding the expected 150,000 jobs and surpassing the expectations of all economists surveyed by the media, marking the largest increase since March this year. The unemployment rate unexpectedly decreased, and the year-on-year wage growth rate increased. The Federal Reserve, which cut interest rates by 50 basis points earlier due to concerns about a weak labor market, has come under fire. Wall Street bigwigs have expressed that the September jobs report will make the Federal Reserve quite uncomfortable, with major Wall Street banks lowering their expectations for a 50 basis point rate cut in November to 25 basis points.

Former Treasury Secretary Summers: 50 Basis Point Rate Cut in September Was a Mistake

After the release of the non-farm payroll data for September, former Treasury Secretary Larry Summers, known as the "U.S. Inflation Alarmist," stated in a post on X,

"In hindsight, the 50 basis point rate cut in September was a mistake, although this mistake did not have a significant impact."

The employment report confirms people's suspicions that we are in a "high neutral interest rate environment," in which monetary policy needs to be cautious when cutting rates.

"Soft landing" and "hard landing" are risks that the Federal Reserve must address.

At the Federal Reserve's meeting in September, policymakers expressed confidence in controlling inflation and shifted their focus to the labor market. The latest employment data helped alleviate some concerns, with investors now betting that the Federal Reserve will make a smaller 25 basis point rate cut at the November meeting. In contrast, Federal Reserve policymakers indicated last month that they were inclined to cut rates by another 50 basis points in the remaining two meetings this year.

Former Soros Deputy Druckenmiller: Federal Reserve May Be Backed into a Corner

Stanley Druckenmiller, former Soros assistant and billionaire investor known as the "Wall Street Genius," is concerned that the latest non-farm payroll report may have backed the Federal Reserve into a corner on future rate cuts.

Druckenmiller stated:

"I hope the Federal Reserve will not be trapped by forward guidance as it was in 2021. GDP is above trend, corporate profits are strong, the stock market has hit historic highs, credit is very tight, and gold is hitting new highs. Where exactly is the tightening?"

At 71 years old, Druckenmiller currently operates his family wealth management office, Duquesne Family Office. Analysts believe that his comments echo warnings from other Wall Street figures that the market needs to maintain cautious expectations about the pace and extent of central bank easing policies.

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

Wall Street Big Banks: Fed to Cut Rates by Only 25 Basis Points in November

Economists at JPMorgan Chase and Bank of America on Friday forecasted that following the "strong" job report in September, the Federal Reserve will cut rates by 25 basis points in November, compared to their previous prediction of a 50 basis points cut.

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

"Recent data showing a cooling job market, which had raised concerns of potentially evolving into a more serious issue, seems to be back on track after today's report. We believe that for the committee to deviate from the current gradual rate normalization path, there must be a very large surprise in October or early November."

Bank of America now predicts that the Fed will cut rates by 25 basis points in November and continue with 25 basis points cuts at each meeting until March 2025, followed by quarterly cuts for the remaining year. Aditya Bhave, U.S. Economist at Bank of America, wrote in a report on Friday.

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

The bank also raised its forecast for the Fed's terminal rate range to 3%-3.25%. Bhave stated, "Considering a series of data pointing to stronger productivity growth, the risk for this number is skewed to the upside."

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

"This report tells the Fed that they still need to proceed with caution, as the strong labor market and stubborn housing data suggest that significantly lowering inflation in the short term will not be easy."