Weak Jobs Report May Be First Warning That Fed Went Too Far with Rate Hike

The September jobs report revealed that employers added just 29,000 jobs in September, missing the consensus forecast of 90,000. This suggests that the Federal Reserve may have made a mistake by raising interest rates to fight an energy-driven inflation spike. The unemployment rate rose to 4.2% from 4.1%, and revisions cut a combined 60,000 jobs from the July and August totals.

The Fed raised interest rates in mid-September to 4.00% from 3.75%, betting that the labor market could handle the pressure. However, this report shows that it may have had less room to spare than they thought. Layoffs remain rare, but job openings fell to 7.08 million in August, a drop of 256,000 from July.

The slow wage growth is also a concern for the Fed. Average hourly earnings rose only 0.1% in September, and annual wage growth slowed to 3.0%. This suggests that the second round of inflation is not showing up, which means that the Fed's decision to raise rates may have been unnecessary.