U.S. Jobs Report Bolsters Labor Market, Discourages Fed Cuts
Key Takeaway
A stronger-than-anticipated jobs report has erased expectations for an interest rate cut this month, weighing on risk assets including tech stocks and cryptocurrency, while adding uncertainty to Fed Chair Powell’s position.
Jobs Report Highlights (June 2024)
- U.S. employers added 147,000 nonfarm positions in June, significantly exceeding the 111,000 economists projected and marking the largest gain in three months.
- The unemployment rate edged down to 4.2%, the lowest level since February 2023.
- Revisions showed upward adjustments to prior monthly job gains, signaling sustained strength.
Market Reaction & Interest Rate Expectations
The robust employment data, released on Tuesday, has led market participants to scale back hopes for monetary easing by the Federal Reserve.
CME Group’s FedWatch Tool indicated a mere 4.7% chance of a 25 basis point rate cut when the Federal Open Market Committee (FOMC) concludes its July meeting. This contrasts sharply with the 24% chance assessed just one day prior.
Conversely, the probability of the Fed holding rates steady through September increased from 6% to 25%, while expectations for policy normalization were maintained in the near term.
Fed Chair Jerome Powell, in recent testimony, had projected a cumulative rate cut of 50 basis points or more by the end of the year. However, the current trajectory suggests this forecast may be downwardly revised.
Bloomberg’s In Brief (Synthesized)
- June Nonfarm Payrolls: +147,000 (Exceeding Expectations)
- Unemployment Rate: 4.2% (Minimum in 3 Months)
- June Rate Cut Probability: Plunged to 4.7%
- Bitcoin Volatility: $109k threshold crossed following data release
BTC and Crypto Markets Navigating Fed Policy Shift
The traditional expectation is that slower economic growth induced by rate cuts should be supportive of volatile assets like cryptocurrency. However, the market dynamics suggest otherwise.
According to crypto data provider CoinGecko, Bitcoin price fluctuated throughout Wednesday, trading between $109,000 and $110,000 after the employment figures were released, before stabilizing near $109,746, a 1.4% gain day-to-date.
Ethereum also saw notable movement, rising 5.2% to nearly $2,600. Other assets like XRP gained 4.1% and Solana climbed 1.7%.
Grayscale Research on Bitcoin Volatility Drivers
Zach Pandl, Grayscale’s research head, stated on Twitter that Bitcoin is resilient despite the reduced likelihood of cuts, especially soon.
“Bitcoin ignores – one hopes,” Pandl wrote. “The market appears to be focusing primarily on the large inflation tax aspect, which is stronger than usually acknowledged.“
“Anticipating monetary tightening that hasn’t materialized, FOMC dissents, and [Trump], all likely offsetting worries some investors have developed about the climate for traditional tech.”
This perspective highlights concerns regarding the national deficit and the political pressure being exerted on the central bank, cited as primary drivers supporting the digital currency’s price.
Federal Reserve Constraints and Policy Outlook
Despite the cooling inflation, the Federal Reserve is expected to remain cautious. The financial markets now project minimal total easing delivered by the FOMC this year, potentially zero quarter-point moves, with the policy path “sidestepping a quick walk-thru the back door,” wrote Paul Ashworth, chief U.S. economist at Capital Economics.
The Fed has held rates steady for four consecutive meetings, indicating its patience. With only four meetings remaining in the year, policymakers must balance workforce strength and inflation persistence.
Federal Housing Finance Agency Director Clashes with Fed Chair
The backdrop complicates the already elevated policy uncertainty. William Pulter, Director of the Federal Housing Finance Agency (FHFA), escalated the political pressure on Fed Chair Jerome Powell in a letter to Congress.
“Chairman Powell needs to be investigated by Congress immediately,” Pulter stated. “I am asking Congress to investigate […] his political bias and his deceptive Senate testimony.”
Pulter alleged falsification concerning renovation reports for the Federal Reserve’s headquarters.
This external criticism adds another layer to what many market participants already perceive as an increasingly divided political-economic landscape influencing monetary policy decisions.
