When will the rate cut window open?

Regarding this non-farm payroll data and the subsequent policy direction, major institutions and industry leaders have expressed their opinions, showing some divergence in attitudes.
Gina Bolvin, President of Bolvin Wealth Management Group, stated that the latest macroeconomic data sketches a picture of a "brief economic respite": employment growth is still maintained, but clear cracks have appeared; consumers remain the main support for economic growth, but the growth momentum has significantly weakened. However, this pattern is not necessarily bad for the Federal Reserve; on the contrary, it allows the Fed greater policy flexibility without triggering market panic, enabling it to adjust policies flexibly based on economic data changes.
Analyst Anstey offered a more cautious interpretation, pointing out that the unemployment rate rose to 4.6% in November, which is likely to attract the Fed's attention. However, it is important to note that this increase in unemployment was accompanied by a rise in labor force participation, so it is not entirely a negative signal. More detailed data analysis is needed. Currently, market expectations for further easing by the Federal Reserve have warmed, but the key detail of the downward revision of 33,000 jobs in employment data for August-September cannot be ignored. This suggests that the previous softening in the labor market may have been underestimated, and future data revisions could pose additional risks.
Michael Collins of PGIM Fixed Income is relatively optimistic about the data, believing that this employment report "is not too bad," mainly because it leaves ample room for the Fed to implement easing policies until 2026. If the labor market continues to cool, the Fed can introduce rate cuts to support economic growth; if subsequent data improves, it can also delay easing to avoid risks from over-adjustment. This "offensive and defensive" stance is advantageous for the Fed. RBC Chief Economist Frances Donald highlighted the core contradiction in the current market, stating that the focus has shifted from "where the labor market is heading" to "how employment weakness will transmit to overall US economic growth." This shift indicates increasing concern about economic growth. If employment weakness further drags down consumption and investment, the US economy could enter a phased recession next year. Therefore, it is crucial to closely monitor changes in key economic indicators such as consumption and investment. John Briggs, Head of US Rate Strategy at Banque Française du Commerce Extérieur, directly focused on market sentiment, stating that the current market's core concern is the unemployment rate. The 4.6% unemployment rate has significantly reinforced expectations of a rate cut by the Fed in 2026, which has slightly boosted US Treasury prices. From the bond market's reaction, funds are gradually flowing into safe assets, reflecting rising market concerns about economic prospects. Nick Timiraos, known as the "Fed's mouthpiece," provided a more detailed data analysis, noting that, based on unrounded figures, the actual US November unemployment rate rose to 4.573%, up 13 basis points from 4.440% in September. The easing trend in the labor market is quite evident. Coupled with slowing wage growth and downward revisions in employment data, the probability of the Fed adjusting its policies in the future is gradually increasing. However, considering the risk of data distortion, the pace of policy adjustments may be cautious. Fed Chair Powell's remarks last week also confirmed the cautious attitude of policymakers. He warned that, due to incomplete data collection in October and the first half of November, policymakers will interpret upcoming economic data with "a relatively cautious attitude." More importantly, Powell mentioned that official statistics may have systemic biases, potentially overestimating non-farm employment growth by 60,000 jobs per month. If this is true, since April this year, the US economy may have actually lost about 20,000 jobs per month, indicating that the softening of the labor market could be much more severe than the surface data suggests.
Combining the above data and institutional views, I believe that while this non-farm payroll report signals a clear cooling trend, three key issues need to be watched closely, as they will directly influence the Fed's rate cut pace.
First, the risk of data distortion cannot be ignored. The government shutdown led to incomplete data collection, reducing the reference value of data from October to November. The Fed is likely to wait for more complete data before adjusting policies, so the probability of a rate cut in January has increased but remains low.
Second, the gap between policy expectations and official statements needs to narrow. Currently, the market has priced in two rate cuts by 2026 quite aggressively, but the Fed has not yet signaled a clear easing stance. If economic data marginally improves later, market expectations could adjust downward, potentially causing market volatility.
Third, the risk of recession must be closely monitored. Factors such as weak employment, slowing consumption, and residual inflation pressures are increasing downward risks for the US economy. Without policy support, the economy could enter a phased recession, which would also force the Fed to accelerate easing measures.
Overall, the Fed's rate cut window is gradually approaching but will not happen overnight. It is likely to adopt a "gradual" approach to policy adjustments. For investors, short-term focus should be on sectors benefiting from easing expectations, but caution is needed regarding market expectation corrections. Long-term, close monitoring of key data such as employment, consumption, and inflation, as well as Fed policy statements, is essential to adjust asset allocations reasonably and avoid potential risks from economic downturns. As Trump interviews candidates for Fed Chair and more economic data are released, market uncertainty will remain high, requiring rational judgment and cautious operation.