NCPA - National Center for Policy Analysis

What Spooked the Fed?

October 7, 2015

Before the September employment report, I thought there was a good chance that the federal open market committee (FOMC) would lift off at its next meeting on October 27-28. With no new employment report due before then and with a weak advance GDP report for the 3rd quarter expected on October 29, that seems impossible now. Furthermore, December 15-16 also seems much less likely since there will be only one new employment report due before then, says distinguished fellow Bob McTeer of the National Center for Policy Analysis.

The unemployment rate held steady at 5.1% in September, but by now everyone understands that this low number is enabled by a low and still falling labor force participation rate. The civilian labor force participation rate dropped to 62.4% with 350,000 leaving the labor force in September, This drop market the lowest labor force participation rate since 1977.

Another sign of weakness in September was a small drop in the average workweek and flat earnings. The average for all employees on private nonfarm payrolls declined by 0.1 hour to 34.5 hours while the manufacturing workweek declined by 0.2 hour to 40.6 hours. Overtime declined by 0.2 hour to 3.1 hours. Average hourly earnings for all employees on private nonfarm payrolls declined by a penny to $25.09 after rising 9 cents in August.

Some have argued that this weak report vindicates the FOMC's non action in September. Maybe so, but one could also argue that they missed an opportunity they should have taken even if these numbers were pending. As they say in Texas, you can argue it round and you can argue it square.

Source: Bob McTeer, "Did The Weak September Jobs Report Derail a 2015 Rate Hike?" Forbes, October 3, 2015.

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