September Jobs Report Injects More Uncertainty Into Fed’s December Decision

Mixed Labor Data Raises Questions About Future Rate Cuts

Recent data from the September employment report has deepened the divide among Federal Reserve policymakers. While some officials argue that a third consecutive interest‑rate cut is still warranted, others warn that rising inflation and a cooling labor market could force the central bank to pause its easing cycle.

Key highlights from the report:

• Non‑farm payrolls increased by 145,000 jobs, well below the market expectation of 200,000.
• The unemployment rate edged up to 4.2%, the highest level since early 2022.
• Average hourly earnings grew at a slower pace of 0.2% month‑over‑month, indicating weakening wage pressure.

The slowdown in job creation comes as consumer prices have shown a modest uptick, prompting concerns that inflation could rebound if the labor market loses momentum too quickly. Fed Chair Jerome Powell emphasized the need for a “balanced approach,” noting that the Committee must weigh both price stability and employment objectives.

Policy Implications for the December Meeting

With the December meeting just months away, the divergent views within the Fed are expected to intensify. Hawkish members argue that the latest data justify maintaining the current policy stance or even considering a rate hike to preempt inflationary pressures. In contrast, dovish members contend that the modest rise in unemployment and slower wage growth provide room for another cut.

Market participants are closely watching upcoming statements from Fed officials and the release of the November jobs report, which could tip the balance toward either a rate cut or a pause in the easing cycle.