All About Jobs and Inflation

September 10, 2024

 In exactly one week, the Federal Reserve’s Open Market Committee will be meeting and contemplating lowering short-term interest rates. For the past several weeks, the markets have been counting on the first decrease in rates since the Fed started the cycle of raising interest rates in March of 2022. All indications have been pointing to this rate decrease with the major question being a choice between a 0.25% or a 0.50% decrease. What could sway the Fed? Two major sets of data will be front and center before the eyes of the Fed during their meeting.

The first set of data was released on Friday in the form of the jobs report. The job market has been exceptionally strong for months and months and only recently has this momentum started to shift. In August the economy added 142,000 jobs, just slightly below expectations. In addition, the previous two months of reports were revised lower by a total of 86,000 jobs. The unemployment rate, which has been drifting higher, ticked down to 4.2% from 4.3%. Overall, this was seen as a report which was below expectations and will serve to increase the Fed’s chances of lowering interest rates.

Another aspect of the jobs data was the wage inflation picture. We saw wages rise 0.4% on a monthly basis. In addition, they rose 3.8% annually. Obviously, inflation is a key factor for the Fed and the persistent wage inflation may keep them from a larger rate decrease. Speaking of inflation, this week the consumer and producer price reports will be released. These represent the second set of data that the Fed will be analyzing closely when they meet next week. The Fed’s number one goal right now is taming inflation. But they won’t want to wait too long to lower rates if the economy is moving away from full employment. Next week should be interesting.

Source: Origination Pro

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