September surprise: US adds 254,000 jobs, unemployment dips to 4.1%
The U.S. economy added far more jobs than anticipated in September while the unemployment rate ticked down to 4.1%. According to the latest data from the Bureau of Labor Statistics (BLS), the U.S. added 254,000 jobs in September when economists expected around 150,000. In August, preliminary data showed 142,000 jobs added and 4.2% unemployment.
With the release on Friday, Oct. 4, the BLS revised July’s numbers up by 55,000 to 144,000 jobs added for the month. It also revised up August’s numbers by 17,000 jobs, from 142,000 to 159,000 jobs added.
In total, jobs added in July and August are 72,000 more than previously reported by the Labor Department.
The latest jobs report comes less than a month after the Federal Reserve lowered its benchmark interest rate by 50 basis points. The U.S. central bank has a dual mandate to maintain stable prices and reach full employment.
This stronger-than-anticipated report will put the Fed’s November meeting in focus, where it is anticipated it will cut rates again by 25 bps.
The Bureau of Labor Statistics said the number of people not working who want a job is at 5.7 million. Construction employment continues to trend up, adding 25,000 jobs in September. The construction sector has consistently grown over the last 12 months, adding an average of 19,000 jobs per month.
Jobs in food services and drinking establishments rose by 69,000 in September, considerably above the 12-month average of 14,000 per month. This sector contained the largest increase in jobs for the month.
Health care added 45,000 new jobs, which is below the average monthly gain of 57,000 over the last 12 months.
The latest jobs report comes amid two large labor disputes.
Powell says Federal Reserve is in no ‘hurry to cut rates quickly’
Experts say the greatest threat to the economy in the next year isn’t the upcoming election or even conflict in the Middle East or Ukraine. More professional forecasters say a monetary policy mistake by the Federal Reserve poses the greatest downside risk.
This month, the Federal Reserve adjusted its policy rate for the first time in 14 months. The Fed cut its benchmark interest rate by 50 basis points in a supersized kickoff to the rate-cutting cycle. But in a speech Monday, Sept. 30 in Nashville, Fed Chair Jerome Powell essentially said not to read too much into the size of that first cut.
“This is not a committee that feels like it’s in a hurry to cut rates quickly. It’s a committee that wants to be guided,” Powell said. “Ultimately, we will be guided by the incoming data, and if the economy slows more than we expect, then we can cut faster. If it slows less than we expect, we can cut slower. And that’s really what’s going to decide it.”
We’re recalibrating policy to maintain the strength in the economy, not because of weakness in the economy.
Federal Reserve Chair Jerome Powell
The Fed’s goal is a soft landing, where they raise rates high enough to bring down inflation without triggering a recession. So far, they’ve reached the rate-cut part of the equation without a recorded recession.
“Our design overall is to achieve disinflation down to 2% without the kind of painful increase in unemployment that has often come with these inflation processes,” Powell said during the National Association for Business Economics annual meeting. “That’s been our goal all along. We’ve made progress toward it. We haven’t completed that task.”
The Fed’s preferred inflation gauge is down to 2.2%, a hair above its 2% target, while core inflation is higher at 2.7%. Meanwhile, the unemployment rate climbed to 4.2% from the 3.4% low hit in January and April 2023.
Federal Reserve board members and bank presidents project unemployment will rise to 4.4% by the end of this year and next, while core inflation won’t hit the 2% target until 2026.
While unemployment is higher than the modern-era lows experienced not too long ago, Powell rebuffed worries about the weakening labor market.
“Just take the current situation,” he said. “What you see is solid growth in the economy and what you see is a solid labor market. So in a way, the measures we’re taking now are really due to the fact that our stance is due to be recalibrated, but at a time when the economy is in solid condition, that’s what we’re doing. We’re recalibrating policy to maintain the strength in the economy, not because of weakness in the economy.”
The Fed will meet two more times this year, with its next 2-day meeting right after the election.
Right now, markets are leaning more toward a 25-basis-point cut rather than a 50-basis-point cut in November, according to CME’s FedWatch. Assuming those in the 25-basis-point camp are correct, that would bring the target range down to 4.5% to 4.75%.
Traders are then projecting the rate will drop down to between 4% and 4.25% following the December meeting, which would equate to a 50-basis-point cut. That’s higher than the 4.4% the Fed itself is projecting.
The federal funds rate now sits between 4.75%-5%, down from 5.25%-5.5%. This marks the first rate cut in four years after inflation spiked amid the COVID-19 pandemic.
“Recent indicators suggest that economic activity has continued to expand at a solid pace,” The Federal Open Markets Committee said in a statement. “Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee’s 2% objective but remains somewhat elevated.”
Inflation cooled for the fifth straight month in August at 2.5%, inching closer to the Federal Reserve’s target of 2%. But core prices, which strip out food and energy, stayed stagnant at 3.2%.
“In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the statement read. “The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2% objective.”
The S&P 500, NASDAQ and Dow notched gains in immediate response to news of the rate cut.
The Federal Reserve has a dual mandate of full employment and price stability. To keep those numbers in line with a strong economy, they use tools like adjusting the federal funds rate, which is the overnight lending rate for banks but in a downstream way affects interest rates on everything from mortgages to car loans.
Hezbollah blames Israel for deadly pager explosions
Hezbollah is blaming Israel after pagers used by the militant group exploded killing at least nine people and injuring thousands. And former President Donald Trump holds his first campaign event since the second apparent assassination attempt on his life. These stories and more highlight your Unbiased Updates for Wednesday, Sept. 18, 2024.
Hezbollah blames Israel for deadly pager explosions
Multiple explosions in Lebanon have killed at least nine people and left nearly 3,000 injured. Explosives inside pagers used by the militant group Hezbollah were set off Tuesday afternoon, Sept. 17.
The Iran-backed group blames Israel for the attack. Hezbollah said an 8-year-old was among those killed and Iran’s envoy to Beirut was among the injured.
Sources told Reuters Israel’s Mossad spy agency had planted the explosives inside 5,000 pagers. An American source and other officials confirmed to the New York Times that Israel was behind the operation.
The pagers appeared to be from Taiwan-based Gold Apollo. In a statement released Wednesday, Sept. 18, Gold Apollo said they were manufactured by another company based in Budapest that was authorized to use Gold Appollo’s brand.
Hezbollah fighters have been using pagers to bypass Israeli location-tracking following a warning by group leaders earlier this year saying cell phones were more dangerous than Israeli spies.
Hezbollah has vowed to retaliate against Israel.
Hezbollah and Israel began exchanging strikes shortly after Hamas’ deadly terrorist attack on Israel on October 7, 2023. Tuesday’s blasts add to the growing concern over a larger war in the Middle East.
Secretary of State of Antony Blinken will be in Egypt Wednesday to work on securing a cease-fire agreement to put an end to the conflict between Israel and Hamas and see the release of the hostages who remain in Gaza.
Trump, Harris both use assassination attempt to highlight policy proposals
Former President Donald Trump was back on the campaign trail Tuesday, holding his first event since the second apparent attempt on his life over the weekend. During a town hall in Flint, Michigan Trump told Arkansas Gov. Sarah Huckabee Sanders the assassination attempts are proof his policy proposals are powerful.
“It’s a dangerous business however, being president,” Trump said. “It’s a little bit dangerous. It’s, you know, they think racecar driving is dangerous. No. They think bull-riding, that’s pretty scary, right? No, this is a dangerous business and we have to keep it safe.”
He later added, “You know, only consequential presidents get shot at.”
Trump also said both President Joe Biden and, his opponent in the 2024 presidential race, Vice President Kamala Harris called him after the assassination attempt, saying it was “very nice” and he appreciated it.
“Not everybody has Secret Service,” Harris said, “and there are far too many people in our country right now who are not feeling safe. I mean, I look at Project 2025 and I look at the ‘don’t say gay laws’ coming out of Florida. Members of the LGBTQ community don’t feel safe right now. Immigrants or people with an immigrant background don’t feel safe right now. Women don’t feel safe right now.”
Both candidates are focusing on swing areas that could decide the election, which is expected to be a close one.
Trump is set to campaign in New York, Washington, D.C., and North Carolina this week. Harris will also stop in Washington as well as Michigan and Wisconsin in the coming days.
Speaker Johnson to bring spending bill up for vote
House Speaker Mike Johnson is expected to put his short-term spending plan up for a vote Wednesday, though there are signs it will not get the GOP support needed to pass.
Johnson previously pulled a stopgap bill that was coupled with the SAVE Act — which would require proof of citizenship to vote in federal elections — after it became clear it was unlikely to get enough Republican approval to pass. House Democrats also opposed the plan, though it would keep the government funded through most of March.
Congress has until the end of September to pass at least a temporary measure keeping the government open, otherwise a shutdown looms Oct. 1.
Federal Reserve expected to cut interest rates for first time since 2020
The Federal Reserve is expected to cut interest rates for the first time since 2020. However, it’s not yet known by how much.
Straight Arrow News Business Correspondent Simone Del Rosario has a closer look here.
Sean ‘Diddy’ Combs denied bail in racketeering, sex trafficking case
Sean “Diddy” Combs has been denied bail and will remain in custody as he faces serious charges, including sex trafficking, racketeering, conspiracy, and transportation to engage in prostitution.
Authorities say Combs will be held by himself at a “special housing unit” in a detention center in Brooklyn.
In a federal courtroom in New York City on Tuesday, Combs pleaded not guilty to the charges he’s facing. Prosecutors allege that Combs used his business empire to force women into engaging in sexual acts with professional sex workers and himself.
Prosecutors allege that in late 2023, following public accusations of these crimes, Combs and his associates attempted to pressure victims into silence through bribery.
If convicted on all charges, Combs faces decades in prison.
Billie Jean King to make history as Congressional Gold Medal recipient
Tennis hall of famer Billie Jean King is being recognized with a prestigious Congressional Gold Medal for her efforts on and off the tennis court.
The measure had already passed the Senate and on Tuesday night, it passed the House, making Billie Jean King the first individual female athlete to ever receive the congressional honor.
🚨 History made! 🚨 The House just passed my bipartisan, bicameral bill to award my friend, @BillieJeanKing, legendary athlete, and ardent advocate, the Congressional Gold Medal, making her the first female athlete to ever receive this honor—yet another iconic trailblazing moment… pic.twitter.com/kbkkym0aVN
“Mister speaker, it is now time to enshrine Billie Jean King’s legacy as not only a champion of tennis, but a champion of equality whose impact will continue to inspire women and girls and people across America and across the world,” Rep. Brian Fitzpatrick (R-PA) said before the measure was passed.
After receiving the news that she would receive the Congressional Gold Medal, King took to X to say, “Thank you. I am deeply humbled and honored.”
Markets are betting on a supersized rate cut. Why the Fed may disappoint.
Markets are increasingly betting the Federal Reserve will make a supersized rate cut at this week’s meeting. There are two camps: Those who believe the Fed will cut interest rates by 25 basis points and those who believe the Fed will double up to 50 basis points.
A week ago, 2 out of 3 futures traders were betting the Fed would do a 25 basis point cut, according to CME FedWatch.
But by the time the Fed started its two-day meeting the morning of Tuesday, Sept. 17, odds had switched. As of 10 a.m. ET, 2 out of 3 futures traders were betting on a jumbo cut to kick off this rate-cut cycle.
“The market is thinking this because the market is sniffing out some economic weakness,” Fed Guy and CIO of Monetary Macro Joseph Wang told Straight Arrow News. “They’re noticing that the unemployment rate has gone up. It seems like there are a lot of indicators that the Fed might be over-tightening, and so in order to get ahead of this, the Fed might want to do with a supersized cut. Now I’m not in that camp, because so far, what I hear from Fed speakers is that it’s more likely that the economy is normalizing.”
Wang is in the 25-basis-point camp, joined by former Fed adviser and QI Research CEO Danielle DiMartino Booth.
“They want to be measured and gradual,” DiMartino Booth told Straight Arrow News. “They want to be Greenspan-esque. [Former Fed Chair Alan] Greenspan had 17 25-basis-point rate hikes in a row. So it was a little bit different dynamic. It was a tightening campaign, but they want to be as measured. They want to be able to say, ‘We’re going to engineer a soft landing. We’re going to be taking interest rates down at a very slow pace.’”
When inflation started getting out of hand in 2022, the Fed began its rate-hike campaign to tighten monetary conditions and get people and businesses to spend less. It hoped the move would bring down prices.
The team hiked the Fed funds target range all the way to 5.5%. They’ve held it there for more than a year now. This is the highest the rate has been since early 2001.
But now inflation is much closer to the Fed’s 2% target, the unemployment rate is rising. Therefore, a soft landing is getting more elusive.
Markets are betting that the Fed funds rate will go down to below 3% by next summer. That would mean cutting 250 basis points in less than a year.
“The pricing in the market seems to be pretty aggressive,” Wang said. “From my perspective, I think there’s too much doom and gloom being priced in. My base case expectation is that rather than having a series of huge cuts that the market is assuming that we have, some steady 25 basis point cuts, and maybe the cut cycle ends, let’s say around 3.5%, rather than below 3%.”
Wherever it lands, Americans will see a change in what it costs to borrow money. In the same way as when the Fed was hiking rates and mortgage rates, auto loans and credit card interest rates soared, this time those interest rates will also go down.
In fact, it’s already happening. Ahead of Wednesday’s Fed cut, mortgage rates fell to levels not seen since early 2023. If the Fed cuts rates by 25 basis points following its meeting, that cut is likely priced into the current mortgage rates. But if they go jumbo-sized to 50 basis points, mortgage rates could go down even more.
Subscribe to the Straight Arrow News YouTube page and tune in Wednesday, Sept. 18, at 2:10 p.m. ET, where SAN will have a live report of the Fed’s final decision and comments from Fed Chair Jerome Powell.
Fed expected to slash rates by 25 bps in September. What’s next?
After the Wednesday, Sept. 11, inflation report came in on target, markets are even more confident the Federal Reserve will cut its rate by 25 basis points following its policy meeting next week. In August, Fed Chair Jerome Powell said it was time for policy to adjust after an “unmistakable” weakening in the labor market. But how much adjusting is coming down the pike after September?
The federal fund target range is a benchmark rate for lending. Since July 2023, the Federal Open Market Committee has held the range between 5.25% and 5.5%, its highest level in more than two decades.
Markets initially expected rate cuts to come much earlier in the year, but after inflation remained stickier than anticipated, September would mark the first rate cut since early 2020 after five straight months of cooling consumer price inflation.
If the Fed decides to cut in September, it will mark the beginning of a rate-cut cycle. After the Fed’s decision on Sept. 18, the committee will meet two more times in 2024, the two days after the November election and Dec. 17-18. For more on how much the Fed may cut this year and next, Straight Arrow News spoke with the Fed Guy Joseph Wang.
The following transcript is edited for length and clarity. Watch the full clip in the video above and catch the entire interview on Straight Arrow News’ YouTube page.
Joseph Wang: So the market is pricing in a very, very aggressive Fed cut cycle, so aggressive that the market is pricing by the end of next year, the overnight rate will be below 3%. So that’s from 5.5% today to below 3% next year.
Now that’s a very aggressive rate path, expected policy pricing by the market, and that seems to assume a significant deterioration in the economy.
Let’s look at the big picture, though. The most recent GDP statistics in the US were revised upwards from 2.8% annual growth rate to 3%, so the economy is actually growing fine. There’s really no indication that we would just suddenly go from 3% to a recession where we don’t grow, we shrink.
Jobs reports, again, slowing, but we’re still creating over 100,000 jobs a month. When we’re in a recession, we don’t create 100,000 jobs a month, we lose 100,000 jobs a month. And so the pricing in the market seems to be pretty aggressive from my perspective, I think there’s too much doom and gloom being priced in.
My base case expectation is that rather than having a series of huge cuts that the market is assuming that we have, [we have] some steady 25-basis-point cuts, and maybe the cut cycle ends, let’s say around 3.5%, rather than below 3%. I say this because, by all indications, the economy continues to have momentum and there’s a good case to be made that rather than falling into recession, we really are just normalizing now.
One other thing that I would mention is that something that’s happening today that hasn’t happened before is that we have tremendous amounts of fiscal spending. The government is expected to have a fiscal deficit of about a couple trillion dollars, basically forever, and when you have the government spending so much each year, that’s very supportive of demand. It’s upward pressure on inflation. It’s not a very good management of the currency, but it is supportive of demand.
And so when you have that kind of fiscal spending, I think that’s a good tailwind. Now, one other thing to keep in mind is that what happens in November could have very big implications for macro policy. We have two candidates with very, very different visions of the world. We also have to look at Congress to see whether or not they are able to carry out their different visions of the world.
So there’s a lot of uncertainty there. But based on what I see right now, the economy is still okay, and the rate cuts in the markets are too aggressive. We’ll have some, but it doesn’t seem like we would have so many, because it doesn’t seem like at the moment that we are tumbling into recession.
Core inflation is still above 3%: Is it time for the Fed to move its target?
Inflation cooled for the fifth straight month in August at 2.5%, inching closer to the Federal Reserve’s target of 2%. But core prices, which strip out food and energy, stayed stagnant at 3.2%. Is it time for the central bank to adjust its core inflation target of 2%?
The Federal Reserve has a dual mandate of full employment and price stability. To keep those numbers in line with a strong economy, they use tools like adjusting the federal funds rate, which is the overnight lending rate for banks but in a downstream way that affects interest rates on everything from mortgages to car loans.
The range is currently set at 5.25-5.50% after the Fed raised rates from near zero starting in March 2022 through July 2023. The Federal Open Market Committee will meet next week and is expected to start cutting interest rates for the first time this year.
While it seems like the 2.5% increase in consumer prices would give Fed Chair Jerome Powell a little cover, the central bank puts the focus on core inflation, which strips out volatile food and energy prices. Core inflation is still at 3.2% annually due mainly to rising shelter costs.
Straight Arrow News interviewed Monetary Macro CIO and the Fed Guy Joseph Wang Wednesday morning, Sept. 11, to discuss the latest inflation data. The conversation turned to whether the 2% target is a realistic endgame.
The following transcript is edited for length and clarity. Watch the full clip in the video above and catch the entire interview on SAN’s YouTube page.
Joseph Wang: I think we might be in a new, higher inflation regime. So we have to be careful. The future does not always look like the past. Over the past 20 years, we’ve had a world where inflation was pretty stable around 2%, but it wasn’t always like that.
Before the “Great Moderation” period, we were in the 1970s and 80s where inflation was volatile and sometimes very high. I think we’re heading into an era where inflation is probably going to be more volatile and higher than it was in the past. That’s certainly what the CPI is telling me.
Now looking on a year-over-year basis, we’ve been above 3% for some time and honestly, it looks kind of stuck there. Now we could have recessions that temporarily bring that down, but I think the next time we have a recession, maybe we just have more stimulus checks and so forth, and that makes it surge again.
So I think the future is going to be a world where inflation is going to be higher and more volatile. And that’s something that we’re going to have to get used to.
Simone Del Rosario: Fed Chair Jerome Powell gets asked this a lot and he loves to slap this down, which is, “Is the 2% target rate out of date and should we be looking at a 3% target?”
I know Jay Powell continues to stick to his 2% conviction but are you hearing anything different?
Joseph Wang: We have to realize that the 2% inflation target is nothing magical. It’s nothing set in stone. It’s a decision made by people. Now, in the Fed’s case, it was decided in 2012 to have an inflation target of 2%. Does it have to be that way? We could easily change it.
I think it’s helpful to understand why we might want to change the target. Traditionally speaking, economists think there’s a trade off between inflation and unemployment. So they would think that if we have 3% inflation, in order to get 3% inflation down to 2%, we have to have a bit of a recession, we have to have the unemployment rate go up a little bit. So ultimately, whether or not we decide to have a higher inflation target is a political decision as to whether or not the government can tolerate a temporary recession.
When inflation was around 4% and it looked like it would have come down, there were actually many people, influential people, writing columns in big newspapers saying, “Hey, why don’t we just change the inflation target so that it’s 3% or maybe a little bit more, instead of 2%?” They were saying this because they did not want the political costs of having temporarily higher unemployment, of creating a recession. So whether or not we change the inflation target is ultimately going to depend upon the political appetite for economic weakness.
Honestly, at 3% inflation, I think that’s close enough to 2% that people would just kind of struggle and say, “Yeah, it’ll eventually get there,” and they won’t have to change the target. But the next economic cycle, when we have an upswing, maybe inflation goes back to 4%, maybe a little bit more. Depending on who’s in power, maybe they don’t want to take that risk of having a recession to get inflation down, and maybe at that time, we’ll have some serious conversations within the government about whether or not they could change the inflation target.
To your point about what the Fed people have been talking about now, definitely they would never say that they’re going to raise the inflation target. But at the moment, they are having a discussion about their framework and that’s due to be released in a couple years.
There are former Fed speakers who are whispering that, “Instead of having a 2% inflation target, what if we have something called an inflation band?” So what that means is that my target is not a 2% point, but maybe it’s 2% plus or minus 1%. So that means that inflation at 1.5% is within the band, it’s okay. If it’s 2.5% or even 3%, that’s okay as well.
So that could be a way to, by sleight of hand, increase the inflation target simply by tolerating inflation higher than 2% because it’s still within the band. That is something that people discussed before in the Fed and now they’re discussing again. I don’t know what they will ultimately decide. I think it might depend upon just how easy they think it is to maintain 2% in the coming years.
Inflation cools to 2.5% in August but monthly core prices came in hotter
Consumer price inflation cooled for the fifth straight month in August at 2.5% annually, inching closer to the Federal Reserve’s target of 2% inflation one week before the central bank’s next rate decision. Monthly prices rose 0.2% from July, according to data released by the Bureau of Labor Statistics Wednesday, Sept. 11.
Core inflation, which removes volatile and energy prices, rose 3.2% annually and 0.3% compared to July. While the annual number came in as expected, the monthly increase is hotter than the 0.2% expected.
Shelter continues to be the main driver of core inflation as the index went up 0.5% compared to July and is still up 5.2% year-over-year. Shelter price increases are responsible for 70% of the annual rise in core prices.
The price of groceries didn’t budge on a monthly basis, and food away from home rose 0.3% over July. Energy prices dropped 4% annually while gas prices are down 10.3% compared to August of last year.
New car prices were unchanged for the month and fell 1.2% on an annual basis. Used cars, which had a massive spike amid the latest inflation run, dropped 10.4% compared to August 2023.
The BLS also reported the airline fares index rose 3.9% in August after declining in each of the previous 5 months.
August’s inflation report is one of the last data puzzle pieces ahead of the Federal Open Markets Committee meeting next week. The Federal Reserve is expected to cut interest rates for the first time since 2020. The central bank has a dual mandate and uses inflation data and unemployment to make its policy decisions.
The U.S. economy missed expectations and added just 142,000 jobs in August, but the unemployment rate did come off July’s surprise 4.3%, settling at 4.2%.
August jobs report misses with 142,000 jobs added, unemployment at 4.2%
The U.S. economy added fewer jobs than anticipated in August, but the unemployment rate did come off July’s surprise 4.3%. According to the latest data from the Bureau of Labor Statistics (BLS), the U.S. added 142,000 jobs in August when economists expected around 165,000. The month’s unemployment rate of 4.2% came in as expected.
In July, preliminary data showed 114,000 jobs added and 4.3% unemployment, triggering a recession indicator known as the Sahm Rule.
In Friday’s release, the BLS revised down July’s numbers to just 89,000 jobs added for the month. It also revised down June’s numbers by 61,000 jobs, from 179,000 to 118,000 jobs added. In total, jobs added in June and July are 86,000 lower than previously reported by the Labor Department.
This is in addition to a massive downward revision for the 12 months ending in March. According to Labor Department revisions, the U.S. economy added 818,000 fewer jobs than previously reported over that time. Therefore, while the labor market remained strong over those 12 months, it did not perform as well as the initial data indicated. The Labor Department will not finalize these estimates until February 2025.
“It is an indication that the Fed really has to step in at this point,” Business Insider Deputy Editor Bartie Scott told Straight Arrow News. “It’s under some pressure that maybe it has waited too long, and I think those numbers potentially back that up.”
“The interest rate hikes and keeping them steady for a year has really slowed down the labor market,” Scott continued. “And those numbers are showing us that maybe it started before we knew and it’s slower than we knew.”
The Federal Reserve is expected to cut its benchmark interest rate in its September meeting, the first such cut since March 2020. The Federal Open Market Committee has been holding the target range at a two-decade high of 5.25%-5.5% for more than a year in an attempt to bring down inflation.
At a speech in Jackson Hole, Wyoming, in August, Fed Chair Jerome Powell said it was time for policy to adjust after “unmistakable” cooling in the labor market. The Fed makes its next rate decision on Sept. 18.
Americans surprise with confidence in economy though job concerns grow
Americans are more confident in the economy than analysts expected and that confidence has been growing throughout the summer. The Conference Board released its consumer confidence survey for August, with a 103.3 rating, beating the 100.7 expected and exceeding July’s 101.9 surprise.
It’s the highest confidence rating in months, but there’s more behind the headline number.
Conference Board Chief Economist Dana Peterson said that while consumers are more positive about business conditions now and in the future, they’re also more concerned about the labor market.
In July, unemployment rose to 4.3%. In August, fewer people told the Conference Board jobs were “plentiful” while slightly more said jobs were “hard to get.” Fewer people also expected their incomes to increase this year, while more expected their incomes to decrease.
That said, Americans’ inflation expectations dropped to their lowest level since March 2020. That comes as the Federal Reserve’s own inflation expectations are getting more rosy, as Fed Chair Jerome Powell addressed in his Jackson Hole speech last week.
“Inflation is now much closer to our objective, with prices having risen 2.5% over the past 12 months,” Powell said. “After a pause earlier this year, progress toward our 2% objective has resumed. My confidence has grown that inflation is on a sustainable path back to 2%.”
“He is confident now, not just waiting for more confidence, but confident that inflation is moving lower,” Central Bank Central Editor-in-Chief Kathleen Hays emphasized in an interview with Straight Arrow News. “It’s heading for that 2% target. And the concern is unemployment.”
Powell’s speech signaled a likely rate cut coming in September, and Americans are expecting interest rates to decline. That expectation, however, hasn’t made Americans rethink buying homes. Average responses over the past six months show plans to purchase homes are at a new 12-year low. But Americans are planning more smaller purchases. Buying plans for cars, refrigerators, TVs, washing machines, smartphones and laptops all increased.
Overall, Americans are feeling better about their family’s financial situation moving forward. They don’t see the results of the election causing much volatility in the economy and recession expectations are unchanged in August and well below 2023’s peak.
But confidence can be drawn along income lines. Those making less than $25,000 are feeling less confident overall, while those making more than $100,000 are the most optimistic.
Businesses, investors and the Federal Reserve all pay close attention to measures of consumer confidence. It’s a window into how much buying power Americans are comfortable yielding, and household spending accounts for more than two-thirds of the U.S. economy.
