Fed rate cuts look viable as inflation cools and job market stabilizes

1 big thing: The case for early rate cuts

Illustration of Jerome Powell with a pair of scissors, about to cut a percentage sign

2. What the Fed does (and doesn't) know

As we begin a busy week of economy-watching that culminates in November's jobs report out Friday, we look at why markets increasingly see interest rate cuts on the near-term horizon — despite Federal Reserve officials' best efforts to disabuse them of the idea.

ICYMI: Our colleagues Stef W. Kight and Alex Thompson report that Democrats are backing away from the "Bidenomics" messaging that the White House embraced earlier this year. 

Today's newsletter, edited by Javier E. David and copy edited by Katie Lewis, is 650 words, a 2½-minute read.

Macro

green

Stay ahead of the curve on the most important economic developments with reporting and analysis on how business, policy, and markets collide.

Axios Macro

Standard

What the green transition means for the economy

1 big thing: What the green transition means for the economy

Fed chair Jerome Powell tries to chill rate cut talk

2. Powell tries to chill rate cut talk

As global leaders meet in Dubai for the COP28 climate summit, we unpack how a warming planet — and efforts to mitigate or adapt to it — will make economic policy more complex in the years to come.

Plus, hot-off-the-presses comments from the Federal Reserve chair during an appearance at Spelman College this morning.

Today's newsletter, edited by Javier E. David and copy edited by Katie Lewis, is 741 words, a 3-minute read.

1 big thing: Job openings plunge

2. Services sector still looks strong

Illustration of a tip jar with an upward arrow in masking tape on the front. 

In today's Macro, we parse the latest data on job openings and the service industry — both of which were released just two hours ago — and declare a winner in one of the great economic debates of the summer 2022.

Today's newsletter, edited by Kate Marino and copy edited by Katie Lewis, is 644 words, a 2½-minute read.

The meaning behind the reversal of long-term rates

1 big thing: Long-term rates' rapid reversal

2. "End of an era"

Illustration of bar chart columns forming a briefcase.

In advance of the government's November jobs report due out Friday, we look at the private-sector equivalent that hints the labor market is entering a new phase.

But first, we tease apart why that huge surge in long-term interest rates we covered extensively in September and October has almost completely flipped.

Today's newsletter, edited by Javier E. David and copy edited by Katie Lewis, is 654 words, a 2½-minute read.

How deglobalization could ripple across the economy

1 big thing: The risks of deglobalization

Illustrated collage of a globe in pieces with lightening bolts coming out of the edges. 

2. Bank of Japan's hawkish hints

Yesterday in Washington, influential economists and policymakers warned about a bumpy path as the world moves away from economic interconnectedness. The top takeaways are below.

Plus, new hints that Japan could end its ultra-easy monetary policy sooner rather than later. 🇯🇵

Today's newsletter, edited by Javier E. David and copy edited by Katie Lewis, is 669 words, a 2½-minute read.

FetchError

National

The U.S. labor market added 199,000 jobs in November, while the unemployment rate fell to 3.7% from 3.9%, the Labor Department said on Friday.

Why it matters: The jobs market surprised to the upside, with more jobs than economists anticipated, easing concerns that the labor market is rapidly cooling.

Economists expected the economy to add 185,000 jobs last month.

The Labor Department also said the economy added 262,000 jobs in September — 35,000 fewer than initially estimated. In October, the economy added 150,000 jobs. 

The big picture: The data comes as the Federal Reserve considers whether further interest rate increases are necessary to slow the economy down to get inflation back to its 2% target. 

The central bank is expected to hold rates steady again at its policy meeting next week, though economic forecasts set to be released could signal whether there is an appetite to continue to raise rates.

Where it stands: The Fed's prior interest rate increases have, so far, resulted in little economic pain for workers. That is still apparent in the payrolls report released on Friday.

Average hourly earnings, a gauge of wage growth, rose by 0.4% last month. Compared to the prior year, average hourly earnings rose 4%.

The share of the population with a job rose to 60.5%, up 0.3 percentage points from the prior month.

Among the sectors that saw the biggest wage gains: health care (+77,000) and government (+49,000). The manufacturing sector added 28,000 jobs, reflecting the return of striking auto workers.

U.S. unemployment rate falls to 3.7% in November

The better-than-expected figure show the U.S. labor market continues to surprise to the upside.

A worker operates a wood milling machine in Provo, Utah. Photo: George Frey/Bloomberg via Getty Images

Jobs report

Jobs

Labor Market

Policymaking

Stock market

The <a class="gtmContentClick" data-vars-link-text="U.S. labor market" data-vars-click-url="https://www.axios.com/2023/12/05/us-job-market-openings-labor-pandemic-covid" data-vars-content-id="441de13a-aa9e-4683-b57a-ccae41ab834f" data-vars-headline="U.S. unemployment rate falls to 3.7% in November" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/12/05/us-job-market-openings-labor-pandemic-covid" target="_self">U.S. labor market</a> added 199,000 jobs in November, while the unemployment rate fell to 3.7% from 3.9%, the Labor Department said on Friday.Why it matters: The jobs market surprised to the upside, with more jobs than economists anticipated, easing concerns that the labor market is rapidly cooling.

Latest news on Wall Street, Corporate America and financial regulation.

Business

Top stories & latest news on the Federal Reserve, real-time data, plus the biggest shifts happening in the U.S. and global economy.

Economy

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

Politics & Policy

JPMorgan CEO Jamie Dimon ramped up his years-long opposition to bitcoin and other digital currencies on Wednesday, suggesting that lawmakers should move to ban cryptocurrency altogether.

What they're saying: "If I was the government, I'd close it down," Dimon said at a Senate hearing alongside seven other big bank CEOs.

Why it matters: Dimon, of course, is not the government and can't alone move to ban cryptocurrency. However, it showed a rare moment of harmony between the industry and longtime bank antagonist Sen. Elizabeth Warren (D-Mass.) who said cryptocurrency was fueling illicit transactions.

"When it comes banking policy, I am not usually holding hands with the CEOs of multi-billion dollar banks, but this is a matter of national security," Warren said.

Of note: All eight big bank CEOs, including Dimon, agreed with Warren that cryptocurrency firms should follow the same anti-money laundering laws that big banks are subject to. 

Crypto exchange Binance and its CEO Changpeng "CZ" Zhao pleaded guilty last month to money laundering violations. 

The crypto exchange can continue to operate — but only because it is required to create an anti-money laundering system.

Catch up quick: Dimon has not been shy about his views on the cryptocurrency industry, which date back to at least 2014.

"I've always been deeply opposed to crypto, bitcoin, etc.," Dimon said on Wednesday.

Yes, but: Despite his harsh public comments about the industry, JPMorgan is among the large financial firms investing in crypto-adjacent technologies.

JPMorgan CEO Jamie Dimon says he would "close" cryptocurrency down

"If I was the government, I'd close it down," Dimon said.

Cryptocurrencies

JPMorgan CEO <a class="gtmContentClick" data-vars-link-text="Jamie Dimon" data-vars-click-url="https://www.axios.com/2023/11/14/nikki-haley-republicans-jamie-dimon-economy" data-vars-content-id="78d0dc0f-6f3c-431b-bdae-50719bc5ecf4" data-vars-headline="JPMorgan CEO Jamie Dimon says he would &quot;close&quot; cryptocurrency down" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/11/14/nikki-haley-republicans-jamie-dimon-economy" target="_self">Jamie Dimon</a> ramped up his years-long opposition to <a class="gtmContentClick" data-vars-link-text="bitcoin " data-vars-click-url="https://www.axios.com/2023/12/05/bitcoin-binance-money-laundering" data-vars-content-id="78d0dc0f-6f3c-431b-bdae-50719bc5ecf4" data-vars-headline="JPMorgan CEO Jamie Dimon says he would &quot;close&quot; cryptocurrency down" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/12/05/bitcoin-binance-money-laundering" target="_self">bitcoin </a>and other digital currencies on Wednesday, suggesting that lawmakers should move to ban cryptocurrency altogether.What they&#x27;re saying: &quot;If I was the government, I&#x27;d close it down,&quot; Dimon said at a Senate hearing alongside seven other big bank CEOs.

Federal Reserve chair Jerome Powell got the final word Friday before the Fed enters a quiet period ahead of the next policy meeting. 

Driving the news: In a brief speech, he tried to tamp down the "interest-rate-cuts-are-coming" narrative that drove financial market excitement this week.

What they're saying: "It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease," Powell said. "We are prepared to tighten policy further if it becomes appropriate to do so."

He added that the Fed "is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced."

Why it matters: A slew of Fedspeak — including, notably, Fed governor Christopher Waller — has dealt with the prospect of rate cuts in 2024.

However, the Fed chief seems to be taking a more measured approach: A near-term easing is not on the table.

Powell said the Fed is committed to "keeping policy restrictive until we are confident that inflation is on a path" to its target.

Of note: Powell spoke at Atlanta this afternoon before an audience of students and faculty at Spelman College — the HBCU from which his colleague, Fed governor Lisa Cook, graduated some 40 years ago. It's the first time a Fed chair has visited the university.

One moment that got big laughs: Spelman president Helene Gayle asked "What does fun look like for the chair of the Federal Reserve?"

"For me, a big, big party, and I mean this is as fun as it gets: a really good inflation report," Powell said.

(Well, it's safe to assume, Powell has been having a lot of fun lately!)

Powell tried to tamp down the "interest-rate-cuts-are-coming" narrative that drove financial market excitement this week.

Federal Reserve chair Jerome Powell speaks with Spelman College president Helene Gayle. Photo: YouTube 

Interest rates

Federal Reserve chair Jerome Powell got the final word Friday before the Fed enters a <a class="gtmContentClick" data-vars-link-text="quiet period" data-vars-click-url="https://www.atlantafed.org/news/press-room/blackout-periods#:~:text=Federal%20Reserve%20policy%20limits%20the,a%20meeting%20unless%20otherwise%20noted." data-vars-content-id="8fdfcd6f-88b2-47b2-804d-1ffe0c544bdf" data-vars-headline="Fed chair Jerome Powell tries to chill rate cut talk" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.atlantafed.org/news/press-room/blackout-periods#:~:text=Federal%20Reserve%20policy%20limits%20the,a%20meeting%20unless%20otherwise%20noted." target="_blank">quiet period</a> ahead of the next policy meeting. Driving the news: In a brief speech, he tried to tamp down the <a class="gtmContentClick" data-vars-link-text="&quot;interest-rate-cuts-are-coming&quot;" data-vars-click-url="https://www.axios.com/2023/11/29/fed-interest-rates-2024" data-vars-content-id="8fdfcd6f-88b2-47b2-804d-1ffe0c544bdf" data-vars-headline="Fed chair Jerome Powell tries to chill rate cut talk" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/11/29/fed-interest-rates-2024" target="_self">&quot;interest-rate-cuts-are-coming&quot;</a> narrative that drove financial market excitement this week.

Major economic powers, including the U.S., are turning inward — a trend sped up by the pandemic and efforts to boost domestic industries. 

Why it matters: The shift away from hyper-globalization poses huge questions for what lies ahead.

These geopolitical divides could create a more brittle global economy, warned IMF managing director Kristalina Georgieva and other leading thinkers at a Council on Foreign Relations event on Wednesday.

What they're saying: "During the highs of globalization, we were a bit too complacent," Georgieva said. "We have to accept that there had to be a course correction — it could be healthy, but only if we do it right."

"What worries us is that we are not quite yet seeing an understanding that in a world of more frequent shocks, the only way to build resilience is to work more together," Georgieva added, noting efforts like climate change and the green transition.

The intrigue: Georgieva cited a slowdown in trade, as well as growing restrictions around the world for the changes.

"It's happening for a reason. It's not that people have become mean and they don't want to trade with each other. ... When trade doesn't grow, that has implications," she said, noting that trade fragmentation could cause a contraction in global GDP growth.

The big picture: Nations have disentangled from one another following COVID-19's historic shock to become more self-reliant — an effort to prevent the sort of supply chain disruption that happened during the pandemic.

Governments are also throwing massive investments into major industries, like semiconductor manufacturing — in the case of the U.S., cutting off the nation from chips is being done on national security grounds.

Between the lines: "You don't get resilience by restricting exports," Caroline Atkinson, who served as a deputy national security adviser in the Obama administration, said during an event panel.

"It's like water. If you try and put in some dams, you might end up with the water going somewhere that you weren't expecting."

Worth noting: Georgieva acknowledged that the global economy was performing much better than economists at the IMF and elsewhere expected.

"We have gone through unthinkable events — COVID, then Russia's war in Ukraine, then the cost-of-living crisis, now a very serious crisis in the Middle East," Georgieva said. "And yet, we are not experiencing a dramatic economic shock."

"During the highs of globalization, we were a bit too complacent," the IMF chief said.

Trade/globalization

China

Major economic powers, including the U.S., are turning inward — a trend sped up by the pandemic and efforts to boost domestic industries. Why it matters: The shift away from hyper-globalization poses huge questions for what lies ahead.

China is becoming the most formidable rival America has faced, and the risk of confrontation with Russia, North Korea or Iran still looms. Authoritarians are rising, the chaotic Afghanistan exit revealed the limits of U.S. power, and the pandemic, climate change and other critical challenges continue to pose grave threats.

World

Leaders of some of the nation's biggest banks attacked regulators over their proposals to toughen industry rules — even threatening at a Senate hearing on Wednesday to challenge the constitutionality of the plan.

Why it matters: It's unusual for the heads of the nation's biggest banks to so publicly berate regulators. The heated exchanges offer a preview of what could be ahead for the proposed rules that CEOs claim will hurt the economy.

What they're saying: "It was not thoughtfully done," JPMorgan CEO Jamie Dimon said, referring to how regulators put forth their proposal for more stringent rules. The proposals "don't make sense ... they weren't well-thought out," added Dimon, who appeared alongside seven other CEOs.

Morgan Stanley's CEO James Gorman also said one of the proposed rules "didn't make sense."

Citibank CEO Jane Fraser said they would be prepared to fight the constitutionality of the proposed regulations, which stem from an international framework, as a "last resort."

Catch up quick: The country's bank regulators — the Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and the Office for the Comptroller of the Currency (OCC) — introduced a proposal over the summer that would require banks to hold higher levels of capital.

Regulators say it will make the banking system safer and more resilient against any crises. 

The other side: Banks, however, say the rules will make lending less profitable. 

At Wednesday's hearing, the CEOs said the proposal will raise the cost of borrowing for consumers, or force institutions to pullback on the activity altogether. 

"If you have capital requirements increase ... to do the exact same activities you did yesterday, you have to get a higher return," said Bank of America CEO Brian Moynihan.

"That higher return will be borne by the customer base — or you'll have to leave the business. Neither of those is good for the customer base."

State of play: The proposal as written is far from certain and might take years before new regulations are fully implemented. Even some top Fed officials have expressed skepticism about the proposals, warning about adverse effects for low-income and Black borrowers. 

Republican senators on Wednesday piled on. "Your bank isn't broken, but [the FDIC] is going to tell you how to fix it," said Sen. John Kennedy (R-La.), alluding to the failures of Silicon Valley Bank under its watch and toxic work environment allegations at the regulator.

"Do you find that ironic? Isn't that kind of like being given gun safety advice by Alec Baldwin?"

Some Democrats also raised concerns about the economic impact of the proposals. That includes Sen. Mark Warner (D-Va.), but he added: "I get extraordinarily frustrated that any time there is any proposed new regulation or rule, the industry reaction is 'Oh my god, the sky is falling.'"

Of note: Sen. Elizabeth Warren (D-Mass.), an outspoken critic of big banks, acknowledged a rare moment of agreement with the bank CEOs about tougher rules for the cryptocurrency industry.

Big bank CEOs slam proposed tougher regulations: "They don't make sense"

The proposals "don't make sense ... they weren't well-thought out," JPMorgan's Jamie Dimon said.

JPMorgan CEO Jamie Dimon appeared alongside seven other bank CEOs in a Senate hearing on Wednesday. Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images

Banking

Federal Reserve

Leaders of some of the nation&#x27;s biggest banks attacked regulators over their proposals to <a class="gtmContentClick" data-vars-link-text="toughen industry rules" data-vars-click-url="https://www.axios.com/2023/11/14/new-banking-rules-senate-testimony-regulators" data-vars-content-id="bb82dd74-22d6-4176-91da-8754e4580868" data-vars-headline="Big bank CEOs slam proposed tougher regulations: &quot;They don&#x27;t make sense&quot;" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/11/14/new-banking-rules-senate-testimony-regulators" target="_self">toughen industry rules</a> — even threatening at a Senate hearing on Wednesday to challenge the constitutionality of the plan.Why it matters: It&#x27;s unusual for the heads of the nation&#x27;s biggest banks to so publicly berate regulators. The heated exchanges offer a preview of what could be ahead for the proposed rules that CEOs claim will hurt the economy.

Courtenay Brown

Stories

U.S. unemployment rate falls to 3.7% in November

How deglobalization could ripple across the economy

JPMorgan CEO Jamie Dimon says he would "close" cryptocurrency down

Big bank CEOs slam proposed tougher regulations: "They don't make sense"

Fed chair Jerome Powell tries to chill rate cut talk

Newsletter editions

⚠️ Deglobalization warning

🔄 Rates round trip

⚖️ The great rebalancing

✂️ Rate cut case

🌎 Climate complexifier