The Fed Saw These Jobs Numbers Coming
Markets seem to think Friday’s report drastically changes the outlook. But this is essentially what policymakers expected all along.
Saw that coming.
Photographer: Chip Somodevilla/Getty Images North AmericaNonfarm payroll growth slowed to just 22,000 in August, and the unemployment rate rose slightly. Meanwhile, yields on two-year Treasury notes plummeted Friday on the expectation that the new data would lead the Federal Reserve to cut interest rates faster and, ultimately, deeper. But for all the hair-on-fire analysis, it’s worth recalling that Fed policymakers basically saw this coming.
Unemployment, now at about 4.32%, is on a slow (and jagged) upward trajectory from the 2025 low of 4.01% in January. Back in June, the median policymaker on the Fed’s rate-setting committee projected that unemployment would end the year at around 4.5% with the core personal consumption expenditures deflator — a popular measure of inflation — up around 3.1% year over year. With core PCE at 2.9% and ticking higher, both of those predictions have stood the test of time1.