US Labor Data Revisions Weaken Case for Further Fed Rate Hikes

The US Bureau of Labor Statistics revised its July and August payroll data on October 2, reducing the estimated job gains by 60,000. This adjustment changes July’s original report of 21,000 jobs added to a loss of 10,000, and August’s gain from 162,000 to 133,000. While these revisions do not indicate new job losses in September, they present a softer labor market than initially thought.

The latest data shows September’s payroll growth at just 29,000, with average hourly earnings rising only 0.1% monthly and 3.0% annually, lower than the previous month’s reported figures. These figures weaken the case for another interest rate hike by the Federal Reserve, which had cited strong job gains as a reason for its September 16 rate increase to a 3.75%, 4% target range.

However, inflation remains a concern, with August’s personal consumption expenditures (PCE) inflation running at 3.4% annually, exceeding the Fed’s 2% target. This complicates the decision on further tightening, as inflation still provides a rationale for higher rates. For Bitcoin, the softer labor market could ease pressure from potential rate increases, though a February 2023 New York Fed study found Bitcoin largely unresponsive to such monetary policy shifts.

The household employment survey presented a contrasting picture, showing an increase of 406,000 in employment, with the labor force growing by 485,000. While these figures suggest a more stable employment landscape, they are not statistically significant enough to declare a decisive rebound or confirm a recession. The next jobs report is scheduled for November 6.