The Fed Needs Clearer Jobs Data, ASAP

The US labor market may be moving from “not great” to “outright bad.” Unfortunately, a more definitive diagnosis will have to wait because the shutdown theatrics of the Washington political class have left us in a lingering data fog.

The latest data showed that the unemployment rate rose to 4.6% in November, up from 4.4% in September (when the data was last available) and a recent low of 4% in January. On the face of it, the upward creep in our most important and comprehensive labor market statistic is an alarming development that would call for further Federal Reserve interest rate cuts. Yet, futures markets currently imply about a 1-in-4 chance of a reduction in January, virtually unchanged from Monday, showing investors don’t quite know what to think.