A weak September jobs report is likely to keep the Federal Reserve on hold later this month, even as Fed officials are still likely to view the job market as balanced at full employment and keep their focus squarely on bringing inflation down.
The economy added 29,000 jobs in September, falling far short of the 88,000 expected and down from a revised 133,000 in August. The unemployment rate edged up to 4.2% from 4.1%.
September’s report is “going to put the Fed definitely on hold for October,” Mohamed El-Erian, professor at the University of Pennsylvania’s Wharton School and former CEO of PIMCO, told Yahoo Finance.
It’s the unemployment rate that Fed officials are most focused on, along with average monthly job growth numbers. The unemployment rate remains low despite ticking up last month, while average monthly job creation sits at 45,000 over the past year.
Read more: How jobs, inflation, and the Fed are all related
This week, Fed Vice Chair Philip Jefferson and New York Fed president John Williams already began to temper expectations for a rate hike later this month, ahead of the jobs report release. Both struck a more cautious tone than several of their colleagues, acknowledging that inflation has remained too high, but that the central bank should take time to watch and assess whether inflation will come down in a timely manner.
“My colleagues and I will need to come to our own judgment, which may take more time,” Jefferson said in a speech on Thursday. “I will continue to assess whether underlying trends suggest that inflation will return to target with sufficient speed. With more data in hand, such trends may lend themselves to better discernment, as may the appropriate stance of monetary policy.”
Williams said that, after raising rates in September, he sees “no need for urgency” and that “we have time to gather more information.”
Jefferson and Williams are closest to Fed Chairman Kevin Warsh and form the central bank’s troika of leadership.
Since Williams spoke on Tuesday, market bets on an October rate hike have plummeted to 18% as of Friday morning from around 70% on Monday.
Williams sees one more rate hike “late this year” to support what he calls a “timelier” return of inflation to the Fed’s 2% target. Late this year, to many, implies a hike timed for December rather than in October, when their next meeting takes place.
Several other Fed officials have sounded more certain this week about the need for further rate increases.
“It’s been too high for too long, and the data that we see there are some promising pieces, but there’s some parts that aren’t as promising,” Boston Fed president Susan Collins said on a panel Thursday at the Investing in Rural America Conference, hosted by the Richmond Fed.
Source: finance.yahoo.com
