Delayed Jobs Data Mixed

What Happened?

After a month-and-a-half delayed release, we finally received the September employment report. The US economy added 119K jobs in September, well ahead of the 51K which had been expected and the 22K (revised to –4K) in August.

Meanwhile, the unemployment rate rose to 4.4%, its highest level since late 2021, during the post-pandemic recovery. With the supply of labor in flux due to immigration policies, the Fed has highlighted the unemployment rate as being more important in its rate cut decisions. It’s risen 0.4 percentage points this year, with almost all of that during Q3, suggesting labor demand is falling faster than labor supply, even with supply constrained.

The BLS has also announced that it will not release a full October payroll report since it was not collecting all the required data during the government shutdown. The November report will be delayed until December 16. As a result, the FOMC will not have any October or November payroll data for when it meets on December 10. Thus, this data report will be the last of the highest-quality labor market data they’ll have to guide their decision.

Implications for Fed Cuts

All the latest commentary out of the Fed—including Chair Powell’s press conference after the October meeting, members’ public remarks since then, and the minutes of that meeting, which were released the day before this jobs data—all make clear that the burden of proof is to convince the Fed to cut in December. Barring a rationale from the data, they are inclined to hold rates for the moment. 

We had anticipated that weak October data would give them the push they needed. However, since that will not be released, it cannot spur a cut. Nonetheless, we think (though we’re not sure), that the September data should be sufficient to convince them to reduce rates in December. We’re counting on the unemployment rate to be as important to their decision as they’ve previously stated. Regardless, it’s not that significant whether they cut in December or in January. A protracted hold would be more meaningful, but with the recent trajectory of the labor market, we see that as unlikely.

What further data will the Fed have for their December meeting? Jobless claims and CPI. We don’t expect jobless claims to move the needle much, barring a surprise in the data. CPI will be somewhat informative, though, and will hit the newswires the morning they make their rate decision in December.

For now, the cutting path is intact—the pace remains the question.