LIVE MARKETS-JOLTS, PMI, trade balance: rate cut can kicked down the road

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JOLTS, PMI, TRADE BALANCE: RATE CUT CAN KICKED DOWN THE ROAD

A trio of indicators on Tuesday showed a tighter labor market, a more robust services sector and a revival of global demand. In short, it helped extinguish any lingering hope that Powell & Co will be implementing another rate cut any time soon.

Unfilled jobs openings increased by 3.3% to 8.098 million in November, 398,000 more than economists predicted.

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS) USJOLT=ECI, which tracks employment churn, also showed hiring slowed and firing dipped slightly.

The quit rate - viewed by many as a barometer of consumer expectations - fell to 1.9% of the workforce, down from 2.1% the month prior.

"Workers not as confident as they were in 2022—when more than 4M a month were quitting voluntarily—about being able to find a job if they quit without another to step into." says Carl Weinberg, chief economist at High Frequency Economics,

As a whole, the report shows a generalized tightening in labor market conditions, with companies unable to hire fast enough to keep up with demand, with workers putting off quitting while faced with a growing heap of unknowns regarding the economy, the Fed and the incoming administration.

Weinberg is quick to add that Powell & Co will find little impetus in this report to jump into further easing.

"These data signal the economy is nearing full employment, not moving away from it," Weinberg says. "The FOMC will find no cause to rush to cut rates in today’s data. The labor market does not need it!"

Separately, the U.S. services sector's expansion picked up some speed last month, according to the Institute for Supply Management (ISM).

ISM's non-manufacturing purchasing managers' index (PMI) USNPMI=ECI rose two full points in December to 54.1, more robust than the 53.3 consensus estimate.

Diving below the headline, business activity accelerated, new orders edged higher and supplier deliveries crossed above the level of 50, into expansion territory.

Employment held firm, and while inventories improved, they still lurked south of 50.

Prices paid - an inflation predictor - added some heat, jumping 6.2 points to 64.4, the hottest reading since February 2023 and a worrisome development for those still clinging to the hope for rate cuts from the Fed any time soon.

"Some of the increased business activity seems to have been driven by preparation for demand in the new year, or risk management for impacts from ports strikes and potential tariffs," says Steve Miller, chair of ISM's services business survey committee. "There was general optimism expressed across many industries, but tariff concerns elicited the most panelist comments."

Finally, the difference between the value of goods and services imported to the United States and those exported abroad USTBAL=ECI increased by 6.3% in November to $78.2 billion, according to the Commerce Department.

Looking closer at the trade gap, imports and exports both rose, by 3.4% and 2.7%, respectively, both recovering from October's decrease.

The goods deficit yawned 5.5% wider, while the services surplus grew by 3.0%.

Matthew Martin, senior U.S. economist at Oxford Economics (OE), cites "uncertainty" baked into OE's forecast for net trade to be "slightly positive or neutral to GDP growth in the fourth quarter, and identifies "the potential for another dockworkers strike," along with "trade policy from the incoming Donald Trump administration" as the reason for that uncertainty.

The closely watched trade gap with China narrowed by 10.6%.

November marks Mexico's 21st month over the last 22 as the United States' biggest import partner, usurping China's crown.

(Stephen Culp)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)