Cryptocurrency markets are facing heightened volatility due to recent U.S. economic data. Employment statistics are putting pressure on the Federal Reserve to consider rate cuts, yet inconsistencies in labor force data are perplexing analysts.
Why is U.S. Labor Data Confusing?
The latest inflation data is set to be released within 24 hours. Employment figures have largely supported risk markets, leading Fed Chair Jerome Powell to hint at rate cuts during his recent Jackson Hole speech. The Kobeissi Letter has shed light on the imbalances present in labor force data, which have sparked numerous discussions. The Kobeissi Letter identified key issues, prompting widespread responses. The non-farm payroll survey response rate has plummeted from 63% in 2012 to a mere 20% this year. Similarly, the unemployment rate survey’s response rate dropped from 90% in 2012 to 70%, while the job openings survey saw a decrease from roughly 65% to 33% over the same period.
Why Are Analysts Worried About Fed Rate Cuts?
Given the lagging nature of labor force data and potential for further downward revisions, the Fed’s slow approach to easing based on this data could be flawed. Analysts have been debating these inconsistencies in recent months, especially considering the impact on inflation details. However, recent surveys indicate that economists’ expectations for rate cuts are not as strong as previously assumed. Notably, 54 out of 71 economists believe the Fed is unlikely to cut rates by 50 basis points in any of the three remaining meetings this year. Meanwhile, 65 out of 95 economists predict three 25 basis point cuts this year.
Concrete Findings
- Employment figures were revised downward by 818,000 for the 12-month period until March 2024. - Recent data suggest significant revisions are likely due to fewer survey responses. - Expectations for Fed rate cuts vary among economists: - 54 out of 71 economists doubt a 50 basis point cut this year. - 65 out of 95 foresee three 25 basis point cuts. - 92 out of 101 expect a 25 basis point cut on September 18, while 9 foresee a 50 basis point cut.
In conclusion, if the Federal Reserve follows market expectations, a delayed but eventual rise in risk markets with slower easing is likely. This could lead to further volatility in the cryptocurrency markets, making careful monitoring essential.
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