U.S. Markets closed

Fed Officials Signal Openness to More Easing After Jobs Report

Steve Matthews and William Edwards

(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Pocket Cast or iTunes.

Two Federal Reserve policy makers -- including one who opposed this year’s interest-rate cuts -- signaled they’re open to considering additional easing after data Friday showed U.S. job growth slowed in September.

Boston Fed President Eric Rosengren, who has twice dissented in favor of keeping borrowing costs unchanged, said on CNBC television that he has an “open mind” on monetary policy and will watch consumer spending closely for any sign that economic growth is falling below its long-run pace of about 1.7%. He stressed that he didn’t want to prejudge the Fed’s next rate decision, due Oct. 30.

In New Orleans, Atlanta Fed President Raphael Bostic said that “depending on how it plays out, there may be more that we need to do” on monetary policy, even as he remains “pretty optimistic” on the economy.

“The economy has performed better, but it has started to fall back,” he said Friday at the Tulane Business Forum. “Some of that was expected. The question is, are we going to get to a soft landing or are we going to a much more steep decline? That is something we are still wrestling with and trying to keep our finger on.”

‘Good Place’

Fed Chairman Jerome Powell didn’t give any signals Friday as to whether he would favor another rate cut at upcoming meetings in October and December. In a brief speech at a “Fed Listens” event, he stressed the importance of continuing the 10-year-old expansion.

While the economy is in “a good place” now, there are risks, and “our job is to keep it there as long as possible,” Powell said in Washington. He stressed the importance of maintaining “our historically strong job market,” which is benefiting low- and moderate-income communities.

Nonfarm payrolls expanded by 136,000 in September, according to a Labor Department report Friday that missed the median estimate of economists. That brought the average gain this year to 161,000, compared with 223,000 throughout 2018. On top of that, average hourly earnings rose 2.9% from a year earlier, the weakest rate since mid-2018.

At the same time, the unemployment rate declined to a fresh half-century low of 3.5%, with the pace of hiring remaining above what’s needed to accommodate population growth. And pay for production and non-supervisory workers held up better than the overall numbers.

“We’re getting to the point where we‘re getting about the kind of employment growth I would expect in a stable economy,” Rosengren said. The question is whether things weaken from here, he said.

Investors still expect the Fed to make its third straight reduction in borrowing costs at the end of this month, though they pared bets slightly after the jobs data. Rosengren’s comment that he’s watching consumer spending suggests two key reports will be important: September retail sales, out Oct. 16, and third-quarter gross domestic product, due hours before the Fed’s Oct. 30 decision.

Federal Reserve Bank of Cleveland President Loretta Mester reacted positively to the jobs data Friday in an interview after the release on CNBC.

“That employment report was a pretty good report,” she said. While the U.S. economy is actually doing pretty well overall, she said she’s also looking for whether weaknesses in trade and manufacturing will spill over to the consumer.

Late Thursday, Fed Vice Chairman Richard Clarida said the economy remains on solid footing and recession risks aren’t “particularly elevated under appropriate monetary policy.”

To contact the reporters on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net;William Edwards in Washington at wedwards29@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Margaret Collins, Robert Jameson

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.