US Economy: Indicators Show Mixed Strength, FRB Internal Disagreements Widen

■ The September jobs report showed stronger-than-expected job growth, but the unemployment rate steadily increased, presenting a mixed picture.  

■ The FRB is divided on whether to keep interest rates steady or cut them in December, complicating policy decisions due to limited data. 

    After a month and a half of partial government shutdown, the September jobs report was released on November 20. Additionally, the Bureau of Labor Statistics (BLS) announced last week that this September’s jobs data would be the last report before the Federal Open Market Committee (FOMC) meets, originally scheduled for December 9-10, which increases its significance. The mixed results from the September jobs data reflect differing views within the Federal Reserve (FRB) on whether to cut interest rates at the upcoming meeting in two ways. Non-farm payrolls increased by 119,000 jobs month-over-month, the largest gain since April, easing recession fears; however, the unemployment rate rose to 4.4%, up 0.1 percentage points from the previous month, reaching a high for this cycle. Examining the structure of non-farm employment, healthcare (up 43,000) and entertainment and hospitality services (up 47,000) were the primary drivers in the private sector, while manufacturing (down 6,000) continued to decline, indicating ongoing weakness in employment. The unemployment rate increased each month from 4.1% in June to 4.2% in July, 4.3% in August, and then to 4.4% in September. Although some of the rise in September’s unemployment rate was due to a higher labor force participation rate, the number of unemployed people in the household survey increased significantly in September (up 251,000 month-over-month). Despite these fluctuations, the signals are concerning. Meanwhile, average hourly earnings rose 0.2% month-over-month and 3.8% year-over-year, providing a positive sign. Overall, although the job market is slowing, it has not yet shown clear signs of deterioration, and this assessment remains relevant. 

 
    The FOMC meeting on October 28-29 decided to cut interest rates by 25 basis points and to halt quantitative tightening (QT) starting in December. However, Fed Chair Powell noted that a December rate cut is not a certainty, maintaining a cautious approach. The minutes indicated that most participants favored a neutral stance on rates over the medium term. However, opinions varied regarding December’s decision: some members believed a rate cut was appropriate, while others thought maintaining the current rate was better, revealing a clear division. Recent statements from officials also reflect this split: if regional Fed presidents who lack voting rights this year are included, more support exists for keeping rates unchanged, whereas more members of the Board of Governors favor a rate cut. Governor Waller, in a recent speech, expressed concern about the weakening of weekly ADP employment data before late October and warned that recent employment figures could face downward revisions. Negative revisions, especially during periods of rising unemployment, suggest that the labor market might be weaker than current data indicates. With limited information for the next meeting, the FRB is likely to face difficult policy choices.