US Jobs Report Eases Fed Hike Worries

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This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead. With insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast with Carol Massar and Tim Stenovec.

Carol Massar (0:32)

Hey folks, yeah, we got to talk about one of the key economic reports of the week. Yes, it was inflation, but it was also the monthly jobs report. The data, we had the US adding fewer jobs than expected in September. We saw wage growth slowing, signaling some caution among employers and made rising costs. Unemployment rate though rising to 4.2 percent, partly reflecting a growing workforce.

Tim Stenovec (0:52)

Also, the two previous months were revised downward. So, is the job market as strong as we thought it was?

Carol Massar (0:58)

I think it's a good question. We're going to dig into that. We also, though, want to explain a little bit about what this means for maybe the US yield trajectory on that. We did hear from Kevin House, the Director of the White House National Economic Council, President's Chief Economic Advisor. Here's what he had to say to our Bloomberg team of Mike McKee and Danny Berger earlier today.

Kevin House (1:18)

The longer rates perhaps have some upside because of real returns being so high. But in the end, that's very, very good for the economy because you have to look at the whole thing. The only reason those log rates would go up, it's a general equilibrium thing, is that the economy is so strong.

Carol Massar (1:33)

All right. The economy is so strong according to Kevin House. Well, depending what he's talking about in terms of relations to where rates go. Kevin House said, of course, Director of the White House National Economic Council, talking with Danny Berger and Michael McKee. Mike, joining us right now, he's of course Bloomberg TV and Radio International Economics and Policy Correspondent joining us here. You've had a long day.

Mike McKee (1:53)

Not as long as you.

Carol Massar (1:54)

Yeah, I did get a few hours of sleep in between from coming back.

Talk to us about what Kevin House had to say. You spoke to him about a lot of different things. And I am curious about what he had to say to you about what it means for rates. And I always think about lower rates mean we got to give the economy some juice a little bit too.

Mike McKee (2:15)

Well, he didn't argue for lower rates at this point.

We did talk about the jobs report, of course, and I mentioned and I think he would have agreed if he weren't working for Donald Trump that sometimes bad news is good news in the sense that the job creation wasn't as strong as we thought and the average hourly earnings were down on a year over year basis to 3%, which is a little bit below inflation. So Americans are not happy about that stuff, but it also means for the president's agenda that the Fed doesn't have to raise rates right away, which is something that they have been concerned about. So bad news is not terrible news for the president. And it wasn't terrible news for the economy either, because the labor market has slowed, the labor force growth has slowed. So we need fewer jobs now to keep the unemployment rate steady. And so 29,000 jobs is not great, but it's still around the bottom of the level you need for that. And the unemployment rate went up to 4.2%, but it really moved by three basis points when you go out to three decimal places.

Tim Stenovec (3:22)

And that is actually because more people were out there actively searching for a job, and so they're added amongst the unemployed.

Mike McKee (3:28)

The denominator grew.

Tim Stenovec (3:29)

What does this mean for what the Fed's going to prioritize now? We know they have the dual mandate, keep inflation low, keep the economy at full employment. Is this report enough to have them think, wait a minute, we now need to really worry about the job market?

Mike McKee (3:43)

No, they don't need to worry about the job market. What it does is take it out of consideration for them. They can focus on the inflation numbers. If we had gotten a strong jobs report, like we did in the initial report in August, then it would have suggested maybe the economy is starting to really heat up and you need to move rates faster. Now, while most of them still think we're gonna need another rate increase, it doesn't have to be in October.