Episode summary
Treasuries Pare Losses After Waller’s Rate Signals
Bloomberg Surveillance
· · 6 min · Guests: Constance Hunter
Summary
Constance Hunter said the latest labor data support the Fed’s recent rate cut, but not yet a bigger rush to ease. She argued the unemployment rate at 4.6% is not enough by itself to draw conclusions, while the household survey points to more weakness and the jobs gains remain narrow, concentrated in construction and health care. In her view, the labor market outside health care and human services is essentially in a “no hire, no fire” state, with young workers and recent graduates seeing the most difficulty finding jobs.
On inflation, Hunter said tomorrow’s CPI should show tariff effects, with about 50 basis points of the print coming from tariffs and most of the passthrough likely to arrive in the first quarter. She linked that timing to tax refunds and other fiscal support that could make households more able to absorb price increases. That view is broadly consistent with Christopher Waller’s message, which Hunter described as inflation remaining well anchored around 2% while the labor market softens. She said her base case is for three rate cuts over the next year, with a possible January cut only if the labor market deteriorates further.
Key takeaways
- Hunter said the latest labor data justify the Fed’s recent cut, but the 4.6% unemployment rate is not enough to confirm a clear trend.
- Hunter sees the labor market outside health care and human services as effectively in a no-hire, no-fire mode.
- Hunter expects about 50 basis points of tomorrow’s CPI to come from tariffs, with most tariff passthrough showing up in the first quarter.
- Hunter’s base case is for three rate cuts in the next year, but she does not see a January cut as the baseline.
- Hunter said the weak spots are most visible for young people and new graduates who are not moving into health care jobs.
Notable quotes
“it certainly justifies the rate cut that they did earlier this month that the Fed did earlier this month”
“the labor market except for health care and human services is in a no hire, no fire situation”
“we're expecting about 50 basis points of the inflation tomorrow to come from tariffs”
“it kind of feels like the the labor market isn't as strong as high unemployment”
“I could see a January pay rate cut. But that is not our baseline”
How the episode opens
You know, we don't know who the president is selecting. And we have a we have a pool in the office. So.
So one of the guys on my team who covers the US really has this sort of secret bet on that. He will not so secret, but but he thinks it's going to be Wahler, of course. I mean, if you look at Poly Market now, Warsh is in the lead, but there's been so much volatility, I think partly because Wahler would be independent, right?
On the other hand, at the moment he is talking about the fact that we have a weak labor market and the fact that we could we should look through tariffs. And so, you know, who knows, maybe he will convince the President today we got some certainty, get some more economic data now that the government is reopened. We had some labor data yesterday.
What do you make of the labor data for, I guess, October in November? Yes. So, I mean, look, it certainly justifies the rate cut that they did earlier this month that the Fed did earlier this month.
I'm not sure what to make of the 4.6% unemployment rate. I would I want to see the December data before I jump to conclusions. Right.
Whether or not we're on this upward trajectory with regard to that. But if you look at all of the little underlying features of the household survey, right, you have a higher number of of unemployed, a slightly higher number of part time for economic reasons of all the little things around the edges from the household survey suggest more weakness. And then, of course, if we look at the establishment survey, we see jobs growth added in construction and health care.
And so that is rather narrow.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- treasuries
- fed rate cuts
- inflation outlook
- job growth
- fed chair transition
Companies and tickers mentioned
- Economist Intelligence Unit
- CNBC
Watch the episode
Watch “Treasuries Pare Losses After Waller’s Rate Signals” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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