The Fed’s favored indicator, the US jobless rate, has fallen to 4.2%. But that’s not the whole story

Determining which way the US job market’s cursor is pointing after publication of the September report is no mean feat. Initially, the financial markets shrugged off the bad news of 30,000 job losses and focused on the good unemployment and wage figures. But uncertainty gradually came to the fore. This is because no indicator projected so much impact of September’s severe weather on US employment and by extension on US economic activity, until this report was published. In this context, and even though the members of the Fed are eager to increase the Fed funds rate, it is not clear that they will be able to cast aside the bad news of contracting salaried employment. Rather, they might have to wait for the next employment report, to be published on November 3, to obtain a clearer picture. Were they to take the initiative now, as their behavior in the last few days would indicate, the markets would be making a risky bet.

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