"New Federal Reserve News Agency": September employment report does not help resolve internal Fed disagreements

On Thursday, well-known financial journalist Nick Timiraos, known as the “New Fed Correspondent,” wrote that the September non-farm payroll report is unlikely to help the Federal Reserve reach a consensus on whether to pause rate cuts next month.

Timiraos pointed out that Fed Chair Jerome Powell initiated rate cuts with his colleagues in September due to concerns that the labor market's weakness may further deteriorate in the coming months. However, he encountered stronger resistance during the second rate cut in October, partly because the U.S. government shutdown made it harder for Fed officials to reach a consensus on their outlook.

Timiraos believes the September non-farm payroll report further deepens this “puzzle”:

On one hand, the rebound in hiring and better-than-expected employment growth may give 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. Many Fed officials see the unemployment rate as one of the clearest indicators of labor supply and demand balance, as changes in immigration have led to significant fluctuations in the number of job seekers. In addition, the employment growth data for July and August were revised downward. In August, the U.S. economy lost 4,000 jobs, the second month this year showing net job declines.

Timiraos concluded that, overall, the labor market nearly stagnated this summer: The average monthly job additions over the three months ending in August was only 18,000, while the average for the three months ending in September was 47,000.

Timiraos said that the downward revision trend has always been viewed by “doves” as a warning, indicating that the labor market conditions may not be as strong as the most recent data suggests. The rise in unemployment and the pattern of frequent downward revisions may give the dovish Fed officials reason to ignore the superficially impressive new jobs in the September employment data.

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