Jobs Revision & Inflation Foreshadow Fed Meeting

Equities moved higher last week as a Fed rate cut looks more and more a certainty. September revisions to payrolls last week was eye-opening to say the least. More than

900,000 jobs were removed from the payroll data in the largest revision in history. Together with 2024, that's more than 1.7 million jobs that never existed. This caused futures on the next Fed rate decision to move even higher toward a 96% probability of a rate cut this week.

This large of a revision over the past couple of years it's easy to see how the competence of the Bureau of Labor Statistics would be in question. With the revision in

mind, the next question is should the Fed have been cutting rates all along in 2025? Had the Fed known about the disparity of jobs, it's easy to see how they should have cut rates. But, the job market overall, while weakness is evident, is not falling off the cliff. While Initial & Continued Jobless Claims have crept up a little, those metrics are still not at recession warning levels yet.

On Wednesday the Producer Price Index for August was released at a much lower rate (-0.1%) than what was expected (+0.3%). That pulled the year-over-year number for PPI

down to 2.7% and last month's reading was revised lower from 3.3% to 3.1%. However, Thursday's release of the Consumer Price Index saw the August data higher than expected (+0.4% vs +0.3%). Regardless, the year-over-year number for CPI is 2.9% - exactly where it was in December of last year (2.9%). While inflation has moved over the last 8 months, it still has not surpassed the historical average of 3.5%. This should provide a path for the Fed to cut interest rates. The Consumer Credit report released last week showed more than $16 billion in spending and Redbook Sales continue to be strong with +6.6% growth on a year-over-year basis (much higher than the 4.4% average). The Atlanta Fed moved their GDPNow estimate for Q3 back above 3% last week. A rate cut by the Fed would be bullish, but could be accompanied by some volatility.

---

Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

Past Performance does not guarantee future results.