In New York morning trade. We are looking at a rally on Wall Street with the Dow, Nasdaq and S&P 500 seeing green across the board. And this does come as Fed rate hike expectations for the October meeting falling on the heels of that softer than expected report. But this has been quite the week. And we did see the Fed's preferred inflation gauge coming cooler than expected.
And we did also get a slew of Fed officials making it clear that inflation is the central bank's top concern. Minneapolis Fed official Neel Kashkari stating that soft data won't stop the Fed from hiking if needed. And on the flip side, New York Fed President John Williams and Fed Vice Chair Philip Jefferson signaling the board may need more time before raising rates again.
Well, joining us this morning to weigh in on the jobs report and the Fed rate outlook is Mark Hamrick, founder and chief economic analyst of the Hamrick Brief. Mark, happy Friday to you. I do want to get your take on the September jobs report. So we did see nonfarm payrolls coming weaker than expected, and the unemployment rate did tick higher.
But there are a lot of finer details that we have to sift through as we head into the final months of this year. So what does it actually tell you about the US economy?
Well, the US economy broadly. And good to be with you, Remy. Happy Friday continues to be more resilient than I think many people would have expected. And that's been a theme that's been ongoing going back to when the Fed was really putting the pedal to the metal to raise interest rates a few years ago. This report is steady but unspectacular, so that's consistent with the resilience.
But we also do need to acknowledge the divergence between the interests of Wall Street and the interests of Main Street, meaning everyday Americans. And in that case, an unspectacular jobs report could be less than satisfying. And I am highlighting both in my newsletter on Substack, as well as my analysis more broadly, that we have this significant gap between worker pay and the trends that we're seeing in inflation.
And so. Average hourly earnings here coming in with a year over year gain of 3%. That's the weakest that we've seen in about five years. And as we know the CPI was up 3.4% year over year. More importantly perhaps, or at least, you know, something to keep in mind as we do get a refresh on the CPI mid month. And then we'll be able to align the September numbers in perhaps a more elegant way.
But I do think that we see this lack of sector participation in the jobs creation, which contributes to this less than robust top line number, with the increase coming in lower than expected. And let's not overlook the downward revisions that we had, making for reduction of 60,000 jobs in total in the previous two months.
And we get back to something that we had seen before, and that is now we get July with a contraction in payrolls, not a huge one, a decline, I think, of 10,000 jobs, but nevertheless, we're getting this sort of marriage of minus and plus signs along the way with respect to the monthly payroll number.
I think so.
Yeah, and a lot of moving parts with that jobs report. And as you mentioned, we are counting down to that October 14th CPI report, especially ahead of the next Fed Reserve meeting. But we have been hearing from Fed speakers this week. And of course, all of our eyes are glued on geopolitics, especially as we inch closer to midterm election time.
So what does all of this mean on the inflation picture when it comes to the American consumer? And did you perceive this week's commentary, as well as the latest reports, as being more dovish or more hawkish in the long term?
I didn't feel like that. It really added much to what we've already been thinking. I know we're looking at those Fed funds futures bounced around a little bit, and there's obviously some hedging that goes on with all of that as well. But I think it's also perhaps a better mindset right now to continue. At least this is my opinion, to think about the notion that interest rates are going to be higher for longer.
Certainly, that's been the message of the markets that we've been seeing of late. And so, you know, we're keeping in mind that there are central banks. And then there are what happens there is what happens with respect to bond market yields. And the latter has kind of been, I think, almost dominating our attention of late, and perhaps also getting the attention of central bankers.
To some degree. I think it's less consequential for those of us that take a long term perspective as to whether we get the rate hike this month or whether we get it in December. I'm thinking about these buy now, pay later programs. Well, we may have to pay later with a rising interest rate at the end of the year.
And I think ultimately what's also significant is the persistence of elevated interest rates. And I think that's where the proverbial rubber really hits the road. Obviously, we can't predict the economy. We've seen so many supply shocks going back to 2020. And as you referenced, well, their geopolitics continues to sort of dominate our mindset as well.
Who knows what happens on that front going forward. But we know what we know today. And today. We had, you know, kind of an underperforming job market report, which was satisfying for financial markets, but not necessarily great news for workers who want to close that gap between inflation and, at least broadly speaking, collectively measured worker pay.
And Mark, finally, before I let you go, we have less than 60s here. But since you mentioned big picture, are you concerned about rising yields?
Well, yes. Because for among other reasons, if we just sort of keep this very much focus close to home, those rising borrowing costs for the federal government mean that there's a further crowding out of our federal dollars. And, you know, between the looming depletion of the Social Security trust fund as well as rising debt and deficits.
These are things that elected officials are going to ultimately either be forced to deal with, or are going to be sort of paying no attention at a time when markets are going to risk forcing a crisis. I'm not saying there's going to be a crisis, but that's the that's the outcome that you do not want to have.
And so if elected officials are attentive to what markets are sort of screaming at them, once we get past the midterms, then it's time to get to work. And the markets are basically saying this is an important issue.
Well, Mark, we will have to leave it there for today. Thank you so much for joining us and have a great weekend.
You too. Remy, thanks so much.
