Dive Brief:
- U.S. employers last month created just 29,000 jobs — less than forecast — and a total of 60,000 fewer jobs in July and August than earlier reported, reducing odds that the Federal Reserve will trim borrowing costs late in October for the second straight month. The unemployment rate edged up to 4.2%, 0.1 percentage point higher than August.
- Average hourly earnings rose only 0.1% in September and 3% during the past 12 months, the Labor Department said Friday, indicating that inflation exceeds wage growth and threatens to slow consumer spending.
- “This report indicates that the labor market is deteriorating faster than expected,” Chris Osmond, chief investment officer for Fifth Third Wealth Advisors, said in a note. “Yet inflation remains elevated, leaving the Fed caught between deteriorating employment data and unfinished work on price stability,” he said.
Dive Insight:
The weak employment data and recent comments from Federal Reserve policymakers prompted traders in interest rate futures to reduce the odds that the central bank will raise the main interest rate this month to 23% from 64% a week ago, according to CME Group’s FedWatch tool.
Two leading central bank officials, Fed Vice Chair Philip Jefferson and New York Fed President John Williams, signaled that policymakers are in no rush to raise borrowing costs.
Jefferson on Thursday noted that bond yields have increased since policymakers on Sept. 18 raised the federal funds rate for the first time in three years with the aim of slowing inflation to their 2% goal.
“My colleagues and I will need to come to our own judgment, which may take more time,” Jefferson said, referring to the prospect of additional tightening.
“I will continue to assess whether underlying trends suggest that inflation will return to target with sufficient speed,” he said.
New York Federal Reserve President John Williams on Tuesday said he saw no pressing need for the central bank to follow up its quarter-point increase in the main interest rate last month with another one at its scheduled Oct. 27-28 meeting.
“With the policy action we took at our September meeting, there is no need for urgency, and we have time to gather more information,” he said in a speech.
“The accumulation of more data should provide greater clarity on the underlying trends in the economy and the associated risks to achieving our goals — and thereby the appropriate setting of monetary policy,” Williams said. He serves as vice chair of the central bank’s Federal Open Market Committee, which determines monetary policy.
The report Friday of weak growth in average hourly earnings last month reinforced the message from Jefferson and Williams, Osmond said.
“The wage data gives the Fed cover to pause,” he said.
“With [growth in] average hourly earnings at just 3% year-over-year and falling, the wage-price-spiral narrative weakens,” he said. “The Fed can credibly argue that labor cost pressures are abating, reducing urgency for additional hikes.”
Anxiety about weak hiring helped push down consumer confidence to a 12-month low in September, the Conference Board said Tuesday.
“Consumers’ views of the labor market softened in September,” the Conference Board said, noting that 23.6% of consumers said jobs were “plentiful” compared with 24.5% in August, and 21.9% of consumers said jobs were “hard to get,” an increase from 20.3%.
The Conference Board’s Consumer Confidence Index fell 6.7 points to 81.8 from 88.6 in August, the Conference Board said.
