Wages

On the whole, this is a good jobs report. It’s hard to find much fault with the data here, and it significantly diminishes the prospects of a July cut.

The Fed will be able to lean on the still-low unemployment rate as a reason for them to hold of making any decisions about interest rates, but the outlook for the labor market is not great.

So far, pain from the tariffs has not shown up in any obvious way in the labor market data, and it may not for a few months.

This is our last snapshot of the labor market before we really start seeing the effects of the new Administration’s policies on the economy.

The further slowing we were worried about last month, particularly in the prime-age employment rate, did not materialize. This sets back expectations for earlier and more rate cuts this year, but it’s certainly a good report for anyone concerned about the left tail of labor market risk.

The 1990s saw an extended period of full employment, high growth, and low inflation. Part of this achievement was attributable to healthcare cost control efforts undertaken by both public- and private-sector actors.

Due to the October payroll number marred by hurricanes and the Boeing strike, the real signal comes from the household survey (where those who are absent due to weather are still counted as employed) and the negative revisions to previous months.

Thanks to outperforming supply-side dynamics, the labor market has already rebalanced. At the same time, income growth is still decelerating and the lagging bits of the inflation overshoot are finally normalizing as a result. The August jobs report should shape how much and how fast the Fed should be cutting,

With all of the softening in the labor market, it’s time for the Fed to actively discuss starting the process of rate normalization.