US Jobs Report Adds Complexity to Fed’s December Interest Rate Decision

The United States (US) released its official September jobs report on Thursday, giving investors and policymakers their first clear look at the labour market since the government shutdown.

The picture is contradictory enough to complicate the Federal Reserve’s next interest rate decision in December.

The economy added 119 000 jobs in September, the strongest gain since April and significantly above forecasts. At the same time, unemployment rose to 4.4%, the highest level since October 2021. Economists had expected unemployment to hold at 4.3% with about 50 000 new jobs.

The contrast with a year ago, when the economy created 240 000 jobs, underlines how sharply hiring momentum has faded.

This one report now carries unusual weight because the Fed will not receive October or November data before its December interest rate decision.

Because hiring did not collapse during the government shutdown, the figures likely reduce the odds of a rate cut. Investors now put the probability of a cut in December at 40%.

Several Fed officials have also warned that inflation, still close to 3%, remains above the central bank’s 2% goal, increasing the pressure to keep policy tight.

Without a Federal Reserve rate cut, borrowing will remain expensive. Combined with growing warnings of a tech bubble, any strain on the credit supporting the industry could expose underlying vulnerabilities, raising the stakes ahead of the Fed’s December meeting.