The Economic data this Friday Surprised NEGATIVELY...
Let's start with the WORST...
1) Payroll (NFP): 162 thousand vs. 55 thousand expected (previous 21 thousand).
HUGE NEGATIVE surprise. The labor market is not cooling; it surged. An economy generating jobs above expectations is less reason for the FED to cut.
Those $162K must be a typo lol.
2) Unemployment: 4.1% (same as expected and as the previous month)
Stable. It did not rise. No sign of deterioration in the labor market. These numbers do not help Warsh.
3) Average hourly earnings: +0.3% for the month (in line with the forecast, above the previous 0.2%).
Wages did not slow down. Labor cost pressure is a bit firmer. This fuels services inflation, which is what the FED is most worried about.
This picture does not help...
The Fed's mandate is employment and inflation. Employment is solid (in fact, more solid than expected). The current discussion in September 2026 is not "when to cut," but whether to raise 0.25 bps or stay put in the 3.50%-3.75% range.
Strong employment data:
- reduces the urgency to stimulate the economy;
- reinforces the argument from the more hawkish members that policy is still not restrictive enough if inflation does not ease clearly;
- makes it harder to justify a cut in the short term.
For the Fed to cut, it would need to see employment clearly weakening and inflation falling convincingly. Today's data failed miserably on the first criterion.
The next release that really matters more for the September decision is CPI/PCE. But today's payroll already reduced the room for any cut narrative, and now we need to make sure we at least do NOT raise.
Let's start with the WORST...
1) Payroll (NFP): 162 thousand vs. 55 thousand expected (previous 21 thousand).
HUGE NEGATIVE surprise. The labor market is not cooling; it surged. An economy generating jobs above expectations is less reason for the FED to cut.
Those $162K must be a typo lol.
2) Unemployment: 4.1% (same as expected and as the previous month)
Stable. It did not rise. No sign of deterioration in the labor market. These numbers do not help Warsh.
3) Average hourly earnings: +0.3% for the month (in line with the forecast, above the previous 0.2%).
Wages did not slow down. Labor cost pressure is a bit firmer. This fuels services inflation, which is what the FED is most worried about.
This picture does not help...
The Fed's mandate is employment and inflation. Employment is solid (in fact, more solid than expected). The current discussion in September 2026 is not "when to cut," but whether to raise 0.25 bps or stay put in the 3.50%-3.75% range.
Strong employment data:
- reduces the urgency to stimulate the economy;
- reinforces the argument from the more hawkish members that policy is still not restrictive enough if inflation does not ease clearly;
- makes it harder to justify a cut in the short term.
For the Fed to cut, it would need to see employment clearly weakening and inflation falling convincingly. Today's data failed miserably on the first criterion.
The next release that really matters more for the September decision is CPI/PCE. But today's payroll already reduced the room for any cut narrative, and now we need to make sure we at least do NOT raise.
