As the federal government remains in shutdown mode, there remains a dearth of official economic statistics, including the all-important Monthly Nonfarm Payrolls Report, which plays an important role in informing the Federal Reserve’s monetary policy.
It has therefore elevated the status of some less followed reports and at least one is sending a major red signal for the labor market.
That would be the monthly job cuts report from the outplacement company Challenger, Gray & Christmas. October data released Thursday morning showed 153,074 layoffs last month, that’s nearly triple the number seen in October 2024 and the highest figure for any October since 2003.
“This comes as AI adoption, weakening consumer and business spending, and rising costs drive belt-tightening and hiring freezes,” Challenger said. “Those laid off now find it more difficult to quickly get new positions, which could further relax the labor market.”
Zooming out shows an equally bleak picture, with job cuts so far this year now exceeding one million, up 65% from the previous year’s level and the highest amount since the Covid panic of 2020.
October’s hiring figure is similarly weak, with just 372,520 hiring plans for the month, the smallest number since Challenger began tracking such data in 2012.
The ball in the Federal Reserve’s court
Crypto markets continue to reel from the Fed’s tough surprise last week, in which the central bank cut its policy rate (as expected), but Chairman Jerome Powell used his press conference to suggest that market participants were very wrong to assume another rate cut in December.
Since then, several Federal Reserve spokespeople have done the same, with at least two saying that if it had been up to them, they wouldn’t even have cut rates last week.
The news was surely among the factors that caused cryptocurrencies to sink in the last eight days, with bitcoin falling below $100,000 before its small bounce this morning to $103,000.
Yes, inflation was among the Fed’s concerns, but the reinvigorated hawks also suggest that the labor market is in good shape and therefore does not need monetary stimulus. Powell also pointed out clearly that the government shutdown and lack of official statistics mean the central bank is largely in the dark as it tries to figure out the economy.
It will be interesting to watch the Federal Reserve’s reaction to today’s shocking Challenger data. For now, traditional markets are not waiting. The 10-year Treasury yield has fallen six basis points to 4.10% and the market-based odds that the Federal Reserve will cut in December have risen to 69% from 60% earlier in the week.
