Following a weak jobs report in October, it seems likely that the Federal Reserve will proceed with an interest-rate cut next week. The data released Friday shows that U.S. employers added only 12,000 jobs last month—the lowest monthly gain since December 2020. Economists had expected a far stronger increase of 113,000 jobs, even after factoring in challenges from a Boeing strike and two major hurricanes in the Southeast.
Despite the drop in hiring, the U.S. unemployment rate held steady at 4.1%. Some analysts interpret this stability as a sign of resilience in the labor market, suggesting that job growth could rebound once the strike concludes and recovery from the hurricanes progresses. Notably, around 512,000 workers reported being unable to work due to severe weather, marking the highest October weather-related job impact since 1976, when the Bureau of Labor Statistics began tracking this metric.
These conditions have significantly influenced trader expectations. Futures traders, whose positions reflect predictions about the Fed’s policy direction, now believe there is a 99% likelihood of a quarter-point interest-rate cut on November 7. This would bring the federal funds rate down to a range of 4.5%-4.75%, compared to a 92% probability before the recent data. However, traders are not anticipating a more substantial half-point cut as seen in September, when the Fed took aggressive steps to counter signs of labor market weakness.
Looking further ahead, futures prices indicate an 83% chance that the policy rate will fall to 4.25%-4.50% by the end of the year, up from 69% before the jobs report. Additionally, traders now forecast that the Fed will lower rates to the 3.50%-3.75% range by July 2025, which is an acceleration from previous projections for a September 2025 target.