Episode summary
Sept. Jobs Report Helps Bolster Rate-Cut Odds
Bloomberg Surveillance
· · 6 min · Guests: Yelena Shulyatyeva, Vail Hartman
Summary
The delayed September jobs report pointed to a labor market that is still expanding but losing momentum, and the guest said that mix helps explain why markets have moved back toward a December Fed cut. She argued that the rise in unemployment to 4.4% is meaningful even if part of it came from workers re-entering the labor force, because permanent layoffs also increased and the report showed more risk to the Fed’s employment mandate.
The guest said there is no single unemployment rate that automatically triggers policy action, so the Fed will instead look at its own projections and whether unemployment keeps rising in October and November. She said the shutdown may have distorted the data, but not enough to dismiss the signal, especially with hiring still weak and federal workers likely spilling into the private labor market.
On growth, the guest estimated the 43-day shutdown could shave about half a percentage point from fourth-quarter GDP, while still leaving time for some recovery. She also said wage inflation looks like it is subsiding, pointing to Atlanta Fed measures and job-switching data as evidence that labor costs should not be a major inflation source going forward.
Key takeaways
- The guest said the September jobs report supports higher odds of a December 10 Fed rate cut because labor-market risks are rising.
- She said the unemployment rate at 4.4% matters even if some of the increase came from workers re-entering the labor force, because permanent layoffs also increased.
- The guest said the Fed has no single unemployment “trigger” rate and will rely on its projections and the next few months of data.
- She estimated the 43-day government shutdown could reduce fourth-quarter GDP by about half a percentage point.
- The guest said wage inflation is likely fading, citing Atlanta Fed job-switching data as evidence that labor costs should not be a big inflation driver.
Notable quotes
“So that's a signal that the risks to the labor side of the dual mandate for the Fed are actually rising”
“the increase in the unemployment rate is a bad thing and if anything, it increases the risk that things could deteriorate”
“So to me, it says that labor market wage inflation is subsiding”
How the episode opens
It's two months old, but that's what we have. It was so exciting to finally have the do right. Well, it's kind of the lost clear data ahead of the shutdown.
Right. So an already you see a pickup in the unemployment rate even before the shutdown is probably going to affect the data on the private jobs. Right.
It will also we will probably also see a pickup in the unemployment rate, given that a lot of federal federal government employers are running rolling off from the payroll in October. So that's a signal that the risks to the labor side of the dual mandate for the Fed are actually rising. So to me, the market reaction yesterday makes a lot of sense with the odds of of a cut raising rate.
But I think it's a still very undecided territory. You know, there's a lot of discussion about, you know, payrolls itself. The reading the headline reading was pretty solid.
So whatever you want to make of it, I have a follow up on this unemployment rate, though, going up second month in a row. Right. Well, we're talking about September now to 4.4%, highest in four years.
What do you make of some people going but wait a minute, it rose for the right, quote unquote right reasons because workers who were on the sidelines came back in and were actively looking for work. And I guess that's when you're considered unemployed, right? Is when you're actively looking for work.
You're part of that survey. What do you make of that? I agree that, you know, unemployment rate rising because people cannot find jobs and they are looking is better than outright layoffs.
But, you know, permanent layoffs also increased in the report yesterday. So, again, there's a lot of mixed signals there.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- jobs report
- fed rate cuts
- treasury yields
- rate pricing
- unemployment data
Companies and tickers mentioned
- BMO
- Conference Board
- BMO Capital Markets
Watch the episode
Watch “Sept. Jobs Report Helps Bolster Rate-Cut Odds” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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