Investing.com -- Wall Street analysts responded to a stronger-than-expected September jobs report on Friday, suggesting it could slow the pace of Federal Reserve rate cuts.
According to Capital Economics, the labor market showed resilience with a gain of 254,000 non-farm payrolls, leading the firm to predict that the Fed will likely cut rates by 25 basis points (bps).
The unemployment rate also fell to 4.1%, while average hourly earnings showed a resurgence with a 0.4% month-over-month rise, pushing annual wage growth to 4.0%.
"The real debate at the Fed should be about whether to loosen monetary policy at all," said Capital Economics, noting that a 50bps cut is "long gone."
Vital Knowledge echoed similar sentiments, highlighting that recent strong economic data, including the solid services ISM report and favorable GDP revisions, suggest the Fed will slow the pace of easing to 25bps in November.
Despite this, Vital Knowledge remains optimistic, stating, "Stocks shouldn't mind given rate cuts are still happening."
Evercore ISI called the report a "stronger-than-expected" signal that reassures the Fed it is "not behind the curve."
The firm sees a 25bps rate cut as likely in November but emphasized that the data suggests the business cycle remains solid. However, Evercore also noted that while payroll gains are impressive, they are not so strong as to disrupt the Fed's plans for gradual easing.
Morgan Stanley added that despite some softness in manufacturing, the broad reacceleration of the labor market supports the view that the Fed will implement 25bps rate cuts in both November and December.
"Strong payroll incomes support consumption into 4Q," Morgan Stanley noted, further reinforcing expectations of continued rate reductions.
They added: "Chair Powell’s baseline is 25bp cuts, assuming no further cooling, and this report indicated a rebound from summertime softness in the labor market."