Fed Whisperer Hilsenrath Kills November Rate Hike Hopes, Plays Down December Too

Despite the imploring of Fed officials that November is a live meeting... just days ahead of the election - it's not (and never really was). As WSJ's fed whisperer Jon Hilsenrath confirms, today's jobs data ensures no fed rate hike in November (with December still the most likely scenario for Janet and her friends). However, Hilsenrath warns, even December is not a sure thing.

The Dollar is diving...

 

 

And this is why...

The subdued September jobs report ensures the Federal Reserve won’t be raising short-term interest rates at its November policy meeting, a week before the U.S. presidential election, and creates a new thread of uncertainty about its action in mid-December.

 

The report—marked by a slight uptick in the unemployment rate to 5%—largely fit the narrative Fed Chairwoman Janet Yellen laid out for the labor market after the central bank’s September policy meeting.

 

People are rejoining the labor force in search of work. Many of them are finding jobs, but not all. The number of employed people, as measured by the Labor Department’s survey of households, rose a robust 354,000 in September from the month before, while the number of unemployed rose 90,000. (A separate survey of business establishments showed employers added a modest 156,000 jobs last month.)

 

The rise in the number of unemployed created by the return of individuals searching for jobs is putting some upward pressure on the unemployment rate. It ticked up from 4.9% in August and has effectively stopped falling this year.

 

Ms. Yellen sees the return of workers to the job search process as a healthy sign. The labor-force participation rate had been falling for much of the expansion as discouraged individuals and aging Americans stopped searching for jobs. That has reversed. The labor-force participation rate was up a half percentage point in September from a year earlier to 62.9%, an apparent sign of optimism among prospective workers that jobs worth seeking are out there.

 

The growing pool of labor is also a sign the job market isn’t yet near overheating. This underscores Ms. Yellen’s plan to move slowly toward raising short-term interest rates.

 

“The economy has a little more room to run than might have been previously thought,” she said at her September press conference. “That’s good news.”

 

The Fed next meets Nov. 1-2, before the Nov. 8 presidential election. Given this “room to run,” confirmed by the latest jobs data, a rate increase at that November meeting is almost certainly off the table. A December rate increase is still the most likely scenario for the Fed, but it isn’t a sure thing. If the jobless rate keeps rising, Fed officials might decide to forestall rate increases until next year.

 

The central bank will have two more jobs reports to observe before it has to make a decision at its mid-December meeting. So there will be plenty of time for deciding.

And while Nov odds are tumbling...

December odds remain stable for now...

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