UBS: US Data Flashes Red, Giving the Fed Reason for "Insurance" Rate Cuts Next Year

According to a report by Jinse Finance, UBS analysis indicates that employment data released this week reveals underlying weakness in the U.S. labor market, which could provide grounds for the Federal Reserve to further cut interest rates early next year. Due to the government shutdown, the U.S. Bureau of Labor Statistics (BLS) delayed the release of its data, which shows that non-farm payrolls in November increased by only 64,000, essentially unchanged from April. Meanwhile, the unemployment rate has continued to climb in the latter part of this year, now reaching 4.6%. These figures paint a picture of economic pressure at the end of the year. For example, the number of people involuntarily working part-time in November reached 5.5 million, an increase of 909,000 from the previous month. The BLS explained that these individuals prefer full-time work but are forced into part-time roles due to reduced hours or the inability to find full-time positions. In addition, the youth unemployment rate rose month-on-month to 16.3%, and the number of people unemployed for less than five weeks reached 2.5 million in November, an increase of 316,000 compared to September. This suggests that new entrants and job switchers in the labor market are facing difficulties in finding stable positions. Although the full employment report for October was not disclosed, this week's data confirmed that federal government employment decreased by 162,000 in October. UBS Chief Economist Paul Donovan noted in a client report that these data "sound multiple alarm bells." He added that, due to the government shutdown exacerbating the BLS's low survey response rate, the quality of the data itself should be treated with caution. However, Donovan also stated that the report does not raise excessive concerns about the resilience of U.S. consumers, as employment in the restaurant industry continues to grow, indicating that the trend of entertainment consumption is still ongoing. Nevertheless, there may be enough warning signs regarding the health of the labor market to justify the Federal Reserve making "insurance rate cuts" next year.