Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
Today we start with that exciting announcement I teased last week, followed by the latest in jobs, and a rant about the Fed.
Greg's Getting a Podcast
Many of you faithful readers out there have reached out to me saying, “I love The Line, but wish I could get more Greg.” I’ll let you decide if I made that up, but either way, it’s finally happening. After 188 editions of The Line—that’s right I’ve done 188 of these—I will begin podcasting this Monday.
The podcast will be called Crossing the Line, and will cover the economy and housing, as well as other things I’m interested in, like music and sports. Basically, it’s about all things Greg. And as you may have guessed from the title, it will be a bit more edgy than this blog.
The podcast will be available on Apple Podcasts, Spotify, YouTube, and more.
So, tune in next week for some great information, and hopefully some great laughs. Don’t worry, I will still be writing this blog, but now you can double your pleasure by listening to the podcast.
Employment Rose Less Than Expected in October
Payrolls were up by 150,000 last month, coming in 20,000 lower than the Dow Jones consensus forecast. Here’s what else you need to know about the report:
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The unemployment rate ticked up from 3.8% to 3.9%. This number was expected to stay at 3.8%, but a 0.1% uptick is no big deal.
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Employment gains were revised downward for both August and September by a combined 101,000. Not the best news, but even after the revision, there were still 462,000 jobs added in August and September. Not too shabby.
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Wages are up 4.1% over the past year, higher than the 3.7% annual rate of inflation. As I’ve said before, wage growth is a lot more important to the inflation picture these days than how many jobs are added.
Many of the headlines this morning say the less-than-expected job growth last month is proof the labor market is softening. That could be true, but then again, many articles only said that after the June report came in below expectations. That idea lasted for just one month, as hiring picked up again in July.
There are also two other current labor-market numbers to consider, and they are 9.6 million and 217,000. The 9.6 million is the number of job openings out there, which tells us that companies are still looking to hire a lot of people. And 217,000 was the number of jobless claims filed last week, very low by historical standards.
The Fed Pauses Again
For the third time in their last four meetings, the Federal Reserve left rates unchanged. Seems like the Fed is punting even more than the Jets and Giants these days. Can you believe that game had more punts (24) than points (23)?
Enough about offensive futility in NFL games, let’s get back to the Fed. I have to admit, I don’t understand the Fed’s mindset any more than the offensive coordinators for the Jets and Giants these days. Here’s why:
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Their target inflation rate is 2%.
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Their preferred measure of inflation is the core personal consumption expenditures index—or “Core PCE” to its friends—which is running at a 3.7% rate.
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So, despite all the progress made to date, inflation is still running at almost double their target rate.
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The economy grew at a 4.9% annual rate last quarter, the fastest pace since 4Q21.
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And finally, their latest economic projections released in September indicated they expected to hike rates one more time.
If they still expect to raise rates one more time—and that is looking “iffier” every day—what are they waiting for? Are they hoping if they leave things alone, it will all just work out? Most economists agree that economic growth will begin to weaken in the coming months, so why wouldn’t you hike rates now when the economy is still very strong?
I just don’t get their logic, but maybe I shouldn’t be surprised given how slow they were to act on inflation in the first place.