Its a coin flip whether the Fed will cuts rates next week or next month but my guess is they will in July, due to peer pressure. Everyone else is doing it. The Fed's mandate is to promote maximum employment and stable prices. Price have stabilized but unemployment is getting weaker even though the stock market is rocketing higher.
The employment picture
-Job openings are declining every month. In March 2022 at peak there were 12,182,000 job openings, in April 2024 there were 8,059,000. That's a 34% decline in 2 years. I'm curious how many of the 8M openings are real jobs, actually looking for a candidate or if the recruiter forgot to take down the opening or if they are trying to keep a pulse on the current conditions without the intent of hiring someone.
https://fred.stlouisfed.org/series/JTSJOL
-People quitting their jobs is down, good for inflation
https://fred.stlouisfed.org/series/JTSQUR
-unemployment rate is crawling up, super slow.
https://fred.stlouisfed.org/series/UNEMPLOY
-The number of people claiming unemployment increased by 3,000 over the last week to a total of 219,000
https://www.dol.gov/ui/data.pdf
The data for the stock market speaks for itself, most of the narrative has been around AI driving the gains, mostly because there isn't anything else exciting going on. Im sure at some point in the next decade we'll start to see all the AI spending show up in the earnings. Im not sure how though when most AI services are FREE. But i think for now we have seen peak earnings, i don't see how a weakening jobs market benefits the stock market earnings. Jobs fuel earnings and consumer spending and good earnings make stock prices go up(most of the time).
Dow Jones Industrial Average- Past Year: +15%
SP 500- Past Year:+24%
NASDAQ100- +30%
I think the Fed will cut rates soon because AI is disrupting the job market making their policy stance more complicated. Its not just about inflation they have a duel mandate. I think that's why Canada cut their rate today and the ECB will cut as well. They can see whats coming on the horizon and its time to steer the ship left or hit an iceberg.
Good example of what happening in the job market, AI is slowly coming into the workplace, replacing workers with bots. We've also seen consistent layoffs at big tech companies that have coveted high paying roles(Google, META, Microsoft, Amazon). These high paying jobs going away will have tickle down effects in the economy. AI hasn't even been fully deployed yet.
Wallstreet has been so hyper focused on the first rate cut that no one is focusing their attention on the forward looking reason why the rate will be cut or needs to be cut. Lets also remember the Fed can raise and cut rates any day for any reason, they don't have to wait until their meeting.
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