Speculation Heats Up Over the Fed’s Next Move as Mixed Jobs Data Return
September’s uptick in unemployment, combined with downward revisions to August job growth, has revived speculation about a possible cut.
Quick overview
- The September employment report showed stronger-than-expected job growth with 119,000 jobs added, but the unemployment rate rose slightly to 4.4%.
- August's job figures were revised from a gain of 22,000 to a loss of 4,000, raising concerns about the labor market's stability.
- Market expectations for a Federal Reserve rate cut have increased due to the mixed employment data, with the likelihood of holding rates steady dropping to 56%.
- The October jobs report will be released after the Fed's December policy meeting, complicating the assessment of labor market trends.
The long-delayed September employment report has created more questions than answers for markets as the Federal Reserve approaches its final policy meeting of the year.
While job growth came in far stronger than expected, the unemployment rate ticked up slightly—enough to keep Wall Street unsure about whether a rate cut is still on the table for December 10.
According to the Bureau of Labor Statistics (BLS), the U.S. economy added 119,000 jobs in September, more than double the projected 53,000. However, August’s figures were revised sharply downward—from a gain of 22,000 jobs to a loss of 4,000. Meanwhile, the unemployment rate rose by 0.1 percentage points to 4.4%, brushing up against the Fed’s upper tolerance limit of 4.5%.
The September nonfarm payrolls report, originally scheduled for release on October 3, became the first major indicator delayed by the government shutdown. Because the BLS had already completed data collection when the shutdown began on October 1, the report was among the first to be published once operations resumed.
Markets Reassess: What Will the Fed Do Now?
Before the unemployment data was released, investors were confident the Fed would hold rates steady. According to CME Group’s FedWatch tool, markets as of yesterday assigned a 70% probability to no change.
That conviction was supported by increasingly hawkish comments from Fed officials in recent weeks, including Chair Jerome Powell. Minutes from the Fed’s latest meeting, published Wednesday, also reinforced expectations of an extended pause, noting that “many” policymakers saw it as appropriate to keep rates unchanged through the rest of 2025.
Market expectations were further shaped by the BLS’s announcement that October’s jobs report—crucial for evaluating labor market trends—will only be released after the December policy meeting and will not include the unemployment rate.
But September’s uptick in unemployment, combined with downward revisions to August job growth, has revived speculation about a possible rate cut. As of Thursday, the likelihood of the Fed holding rates steady dropped to 56%, according to FedWatch.
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