Economists See Fed Holding Rates in October After Hiring Slows Sharply

NEW YORK, Oct. 5 (TodayViralUSA) — A sharp slowdown in U.S. hiring has led many economists to conclude that the Federal Reserve will hold interest rates steady at its meeting later this month, though a number of forecasters warn that stubborn inflation could still push the central bank to raise borrowing costs before the year ends.

Employers added a seasonally adjusted 29,000 jobs in September, well short of the 84,000 expected by economists surveyed by Dow Jones, the Bureau of Labor Statistics reported Friday. The unemployment rate rose to 4.2% from 4.1%, and revisions cut a combined 60,000 jobs from July and August, with July now showing a loss of 10,000 positions, CNBC reported.

Markets moved quickly to price out an October increase. Futures traders put the chance of a quarter-point hike at the Oct. 27–28 meeting at about 16%, down from 64% a week earlier, according to CME Group data cited by Kiplinger. Asian stocks opened the week higher and the dollar eased as investors trimmed bets on aggressive Fed tightening, Reuters reported Monday.

A pause, not a pivot

“For the Fed, this number should be the nail in the coffin for an October hike,” Thomas Simons, chief U.S. economist at Jefferies, wrote in a note quoted by CNBC. He said the strong August figure now looked like a rebound from very weak hiring earlier in the summer.

Eugenio J. Alemán, chief economist at Raymond James, said the report would probably keep the Fed on hold this month while it waits for more data before deciding on a December move, according to Kiplinger. Jeffrey Roach of LPL Financial said the overall softness made two further hikes less likely.

Others said the case for tightening had not disappeared. Tom Graff, chief investment officer at Facet, said he still believed the Fed should raise rates in October to shore up its credibility on inflation. Heather Long, chief economist at Navy Federal Credit Union, described the labor market as stable and said she did not expect the report to deter a December hike, CNBC reported.

Mixed signals

Several economists cautioned against reading the headline figure as a sign of a deep downturn. Richard de Chazal of William Blair argued that an aging population, lower birth rates and reduced immigration have lowered the monthly job gain needed to keep unemployment stable to between zero and 50,000, from about 125,000 last year.

The household survey was stronger than the payroll count, showing employment up 406,000 and labor force participation rising to 61.8%. Economic growth also remains firm, with the Atlanta Fed tracking third-quarter output at a 3.7% annualized pace, according to CNBC.

Inflation is the main obstacle to a prolonged pause. The Fed’s preferred core measure is running at about 3%, above its 2% goal, even as average hourly earnings rose just 3% over the past year, the slowest pace since May 2021. The central bank raised rates by a quarter point in September.

Fed Chair Kevin Warsh said after that meeting that unemployment was consistent with full employment. The September data gives policymakers room to wait, economists said, but leaves December as the next key decision point.