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[Quick Facts]

1. Saudi Arabia and Russia will continue production cuts by year-end.

2. Employment data allows the Bank of Canada to remain patient.

3. U.S. business activity growth has slowed for the 3rd month and services stagnate.

4. Non-farm payrolls data shows a slower job market across the board.

5. Fed's Barkin says whether to raise rates will depend on inflation.

6. Fed's Bostic sees no need for further rate hikes under the current economic trend.

7. Fed's Kashkari doesn't want to overreact to just one month of data.

[News Details]

Saudi Arabia and Russia will continue production cuts by year-end

As concerns about demand and economic growth continue to weigh on the crude oil market, major oil exporters Saudi Arabia and Russia confirmed on Sunday that they will continue with additional voluntary production cuts until the end of this year.

The two countries said they would evaluate the output cuts next month to consider extending, deepening, or increasing them.

Saudi Arabia confirmed that it will continue with its additional voluntary production cut of 1 million barrels per day (bpd). Thus the country will produce only around 9 million bpd of crude oil in December. This additional voluntary production cut is intended to reinforce the preventive efforts of OPEC+ producers to support oil market stability and balance.

Moscow also announced that it would continue to voluntarily cut its crude oil and petroleum product exports by an additional 300,000 bpd until the end of December.

Employment data allows the Bank of Canada to remain patient

The labor market in Canada remains good but is slowing. The unemployment rate rose again in October to 5.7% from 5% in the spring. The underlying data suggest that job seekers are facing greater difficulties than a year ago. Wage growth, while still strong, was also below expectations. The jobs data came out alongside other weak economic data, including weak business sentiment and hiring intentions. Inflation, while not yet close to the Bank of Canada's target, continues to slow. This will allow the Bank of Canada to remain patient and stay on hold.

U.S. business activity growth has slowed for the 3rd month and services stagnate

US PMI data for October showed a much more subdued economy compared to the latest GDP, with business activity growth slowing for the third consecutive month. The surge in service sector activity seen over the summer has stalled. Meanwhile, the manufacturing sector is struggling to regain momentum amid weak global demand. A silver lining to the weak demand environment was a further cooling of price pressures in October. A brighter inflation outlook and hopes of interest rates topping out help boost business confidence in the outlook for the year ahead, but the inflow of new business in both the services and manufacturing sectors will need to accelerate to ensure that strong growth can be maintained.

Non-farm payrolls data shows a slower job market across the board

U.S. non-farm payrolls added 150,000 jobs in October, below market expectations of 180,000, while data for August and September were revised downwards by a total of 101,000.

The private sector contributed just 99,000 jobs to this data, less than half of September's 246,000, while the government sector contributed 51,000, unchanged from the previous two months at 51,000. The stable job growth in the government sector was due to the wage slowdown in the private sector and the fading impact of early retirement. Recruitment in the government sector is gradually showing a comparative advantage.

In the private sector, goods manufacturing job growth fell rapidly from +28,000 in September to -11,000 in October. Among them, employment in the construction sector has been steadily rising. The reason for this is that more buyers are turning to new homes as a result of the lack of inventory in the secondary market, with new home sales up 12.3% in September from a month earlier, and single-family housing starts rising steadily in September.

This sharp decline in non-farm payrolls was not only due to the UAW strike. A sharp slowdown in service sector employment was also a key factor. Only 110,000 jobs were added in the service sector in October, less than half of what was added in September (218,000). Of these, education and health services contributed the most (89,000).

The sector that saw the biggest change this month was the leisure and hospitality industry, which saw a significant deceleration in new employment to +19,000, compared with +74,000 last month. This was due to the fact that the growth momentum in Restaurants & Bars (+48,000) last month was not sustained and negative growth (-75,000) was recorded this month, causing a significant slowdown in employment in this sector.

Overall, September's non-farm payrolls still exceeded expectations, reflecting the bumpy path of the cooling labor market. However, the job gains were only seen in specific sectors, and the impact of the UAW strike could spill over into October's non-farm payrolls. A low response rate could lead to revisions to September's data next month, and employee confidence is low amid a downward trend in the MoM hourly wage growth. Despite strong job growth, the unemployment rate has not fallen. Supply and demand are gradually moving into balance, so the employment data beating expectations does not absolutely mean that the employment trend is reversed. We can patiently wait for next month's data.

Fed's Barkin says whether to raise rates will depend on inflation

Richmond Fed President Tom Barkin delivered a speech last Friday after the release of non-farm payrolls. He pointed out that last month's slowdown in job growth is a welcome sign of the normalization of the labor market, indicating that it is moving in the direction the Fed officials hope to reduce inflation. But he added that he was not yet ready to state where monetary policy would go next.

We have a lot of time before deciding whether to raise rates again or keep the short-term interest rate target unchanged. His view on whether to raise rates again will depend more on the inflation report.

Fed's Bostic sees no need for further rate hikes under the current economic trend

The current trend of the economy seems to indicate that no further rate hikes are needed, said Atlanta Fed President Raphael Bostic in an interview with the press. My expectation is that we will maintain a slow and steady growth path, and if that continues to be the case, I think policy now will be restrictive enough to get us to the 2% inflation target, he said. There's still a long way to go, and there's still a lot to watch and monitor as we think about how the economy evolves.

Bostic expects rates to remain high for about eight to 10 months until the second half of next year. While he does not predict a recession in his baseline outlook, he thinks growth will slow in the coming months.

Fed's Kashkari doesn't want to overreact to just one month of data

Minneapolis Fed President Neel Kashkari expressed his satisfaction with the latest non-farm payrolls data in a speech last Friday. The data shows that the labor market is slowing down, which is what we're expecting, and it's helpful, Kashkari said.

It makes us feel more comfortable that the economy is coming back into balance, but I don't want to overreact to just one month of data, Kashkari said when he was asked if the data showed that the economy was slowing down and was enough to stop the Fed's rate hike cycle.

It is too early to make a definitive decision on whether there is a need for further rate hikes, and officials need to monitor the data, especially the evolution of inflation data.

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