"Here we go again. The surprisingly strong September employment report presages the potential for yet another pivot from the Federal Reserve after their recent incautious jumbo-sized 50 basis point interest rate cut. The Bureau of Labor Statistics' estimate of September nonfarm payroll growth came in at 254,000, well above consensus estimates of 140,000, and accelerating from August's solid 159,000 figure. Wage growth remained strong, and the unemployment rate moved down from 4.2% to 4.1%. This report adds to the accumulating evidence that the somewhat weak July employment report that drove expectations of coming labor market weakening was the product of statistical noise rather than an emerging trend. Indeed, July's estimate was revised up by 55,000 jobs from 89,000 to 144,000.
With the employment side of the Fed's mandate on solid ground, asset prices at all time highs, and inflation still running materially above the Fed's 2% target, there is little evidence to suggest that the Fed's policy stance is unreasonably restrictive. We should not be surprised if the rapid cuts signaled by the Fed and expected by the markets do not materialize, as the Fed is forced into yet another policy pivot by the weight of economic gravity."
- Dan Katz, Manhattan Institute Fellow.
Katz previously served as a senior advisor at the United States Department of the Treasury. He has published widely on economic policy, international affairs, and financial markets in City Journal, The Wall Street Journal, Bloomberg, the Financial Times, Barron’s, National Review, The Hill, and the Center for Strategic and International Studies. For a list of his previous writing at the Manhattan Institute, click here.
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