Inside Economics Podcast #307- Surprise, Surprise

The panel argued that October’s jobs report was materially stronger than expected, but still noisy and likely overstating the underlying trend. Payrolls rose by 165,000, revisions added another 84,000, and the unemployment rate edged lower for the right reasons as labor force participation improved. The discussion centered on the outsized gains in professional and business services, healthcare, and transportation, with several panelists saying they could not find much fundamental evidence to justify the surge in professional services hiring.

The group also noted that wage growth remained only modestly firmer, with average hourly earnings up 0.4% on the month and 3.1% year over year. Most of the panel settled on an underlying job-growth pace in the 50,000 to 70,000 range, though they differed on whether that was closer to break-even or above it. Market reaction was described as muted, though the odds of a December Fed rate hike increased.

Turning to the midterms, the panel said Democrats’ gains in the House and Senate were large enough to make Congress more functional for messaging and oversight, but not large enough to break the veto or filibuster barriers. The main macro conclusion was gridlock: tariff policy looks unlikely to change much, while the key economic issue is whether Republicans can pass a lame-duck reconciliation bill that locks in the budget before the next Congress takes over.