"New Federal Reserve News Agency": The September employment report does not help resolve internal divisions within the Federal Reserve
Timiraos believes that the September non-farm payroll report further deepened the divisions within the Federal Reserve. On one hand, hiring activity rebounded, and the employment increase exceeded expectations, which may give the inflation-focused "hawks" more confidence in opposing another rate cut. On the other hand, the unemployment rate rose to 4.4%, the highest in four years, and the employment growth data for July and August was also revised down, with August being the second month this year to see a net decline in employment
On Thursday, renowned financial journalist Nick Timiraos, known as the "New Federal Reserve Correspondent," wrote that the September non-farm payroll report is unlikely to help the Federal Reserve reach a consensus on whether to pause interest rate cuts next month.
Timiraos pointed out that Federal Reserve Chairman Jerome Powell led his colleagues to initiate interest rate cuts in September due to concerns that a weak job market could further deteriorate in the coming months. However, he faced stronger resistance during the second interest rate cut in October, partly because the U.S. government data shutdown made it more difficult for Federal Reserve officials to reach a consensus on the outlook.
Timiraos believes that the September non-farm payroll report further deepened this "puzzle":
On one hand, hiring activity rebounded, and job growth exceeded expectations, which may give the inflation-focused "hawks" more confidence in opposing another interest rate cut.
On the other hand, the unemployment rate rose to 4.4%, the highest in four years. Many Federal Reserve officials believe that the unemployment rate is one of the clearest indicators of the balance between labor supply and demand, as changes in immigration have led to significant fluctuations in the number of job seekers. Additionally, the job growth data for July and August was also revised down. In August, the U.S. economy lost 4,000 jobs, marking the second month this year with a net job decline.
Timiraos concluded that, overall, the labor market was nearly stagnant this summer: the average monthly job growth was only 18,000 for the three months ending in August, and 47,000 for the three months ending in September.
Timiraos stated that the downward revision trend has been viewed by "doves" as a warning, indicating that the labor market conditions may not be as strong as the most timely data suggests. The rising unemployment rate and the recent pattern of frequent data revisions may give dovish officials within the Federal Reserve reason to overlook the seemingly impressive job gains in the September employment data
