Cooler US jobs growth supports a Federal Reserve pause in October
The desk is calling an October Fed hold and a December hike following a sharply weaker September jobs report, framing the print as the decisive data point that aligns with the recent dovish shift in Fed leadership rhetoric. Per the full note , nonfarm payrolls came in at just +29k versus the +90k consensus with 60k of downward revisions, unemployment ticked up to 4.2%, and wage growth slowed to 3% y/y — a trifecta of softness that removes any near-term inflation threat from the labor market. The desk cites dovish-leaning comments from John Williams and Philip Jefferson as confirmation that the Fed has no urgency to move in October, and it explicitly states it continues to believe market pricing for additional action is too aggressive. With no internal consensus data on the relevant currency pairs available, the synthesis stands on the source's own evidence. The immediate catalyst in the way is the September CPI print due 14 October — a hot number would be required to make the October meeting interesting, though the desk's base case is a December move.
What the desk is arguing
Per the full note , the desk's thesis is that the September jobs report has effectively taken an October Fed hike off the table, leaving December as the most likely date for the next move. The print was weaker than expected on all three key metrics the desk tracks: payrolls, unemployment, and wages. The desk frames this as the culmination of a policy pivot already underway in Fed communications.
The supporting evidence is unambiguous: nonfarm payrolls rose just +29k versus the +90k consensus, with 60k of downward revisions to prior months. The unemployment rate ticked up to 4.2% from 4.1% as participation partially recovered, and wage growth slowed to 3% y/y from 3.1%. The desk also highlights a fourth consecutive month of manufacturing job gains — 72,000 added cumulatively since the start of the year — as the one bright spot, though it does not offset the broader softness.
The alternative read would be that a single soft payrolls print is noise in an otherwise resilient labor market, particularly with manufacturing surveys still strong. The desk is implicitly rejecting that interpretation, leaning instead on the dovish cues from Williams and Jefferson to argue the Fed leadership is already comfortable with a pause.
How other firms see it
No internal coverage data is available for the currency pairs implicated by this commentary, so no cross-firm alignment or divergence can be mapped. The desk's call on a December hike — and its view that market pricing is too aggressive — stands alone against whatever the broader street is pricing. Traders should treat this as a single-source signal rather than a consensus view.
The related instruments to watch are the US dollar index, EUR/USD, and USD/JPY, all of which will reprice on any shift in Fed hike expectations. The September CPI print due 14 October is the next scheduled catalyst that intersects this thesis directly, and the October FOMC meeting itself will be the venue where the pause is either confirmed or contradicted.
What the calendar says
No high-impact events are scheduled in the next 30 days for this jurisdiction according to our calendar. However, the source explicitly flags the September CPI print due 14 October as the one data point that could make the October meeting interesting — a hot reading would challenge the desk's pause thesis. Absent that, the calendar offers no near-term counterweight to the desk's call.
Key takeaways
- 01September nonfarm payrolls came in at +29k versus the +90k consensus, with 60k of downward revisions — a decisive miss.
- 02Unemployment rose to 4.2% from 4.1% and wage growth slowed to 3% y/y, removing any near-term inflation threat from the jobs market.
- 03The desk calls an October Fed hold, with December as the most likely date for the next hike, citing dovish comments from Williams and Jefferson.
- 04The desk believes market pricing for additional Fed action is too aggressive and flags the 14 October CPI print as the only data point that could make October interesting.
Market implications
Watch the 14 October September CPI print as the single calendar catalyst that could invalidate the desk's October-hold thesis. A hot core reading would force a repricing of October hike odds and support the US dollar, while an in-line or soft print would reinforce the pause narrative and likely pressure the dollar lower against EUR and JPY. Positioning into that print should account for the desk's view that market pricing is too aggressive on further Fed action.
Risks to this view
A hot September CPI print on 14 October would force the desk to reconsider its October-hold call and could revive hike expectations for that meeting. Stronger-than-expected October payrolls or a reversal in the participation-driven unemployment uptick would also challenge the thesis. Finally, if Fed leadership rhetoric shifts back toward urgency in the coming weeks, the December-hike base case would need to be pulled forward.
Articles Cooler US jobs growth supports a Federal Reserve pause in October Published 14:10 United States Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download In the wake of dovish-leaning comments from the Fed leadership and softer-than-anticipated inflation, today's weaker-than-predicted jobs figures have further diminished the chances of an October interest rate hike. December remains the most likely date for the next move. We continue to believe market pricing for additional action is too aggressive James Knightley Manufacturing jobs increased for a fourth consecutive month in September, one of the bright spots in a weaker-than-expected nonfarm payrolls number 29,000 Number of jobs added in September Lower than expected September jobs report was weaker on all three key metrics The US September jobs report is softer than expected on all three key metrics. 1) non-farm payrolls rose +29k versus the +90k consensus with 60k of downward revisions, 2) the unemployment rate ticks up to 4.2% from 4.1%, driven by a partial recovery in the participation rate (people returning to the workforce) and 3) and wage growth of 3% year-on-year versus 3.1%, suggesting that there is no inflation threat emanating from the jobs market.
It chimes with the latest comments from Federal Reserve big hitters John Williams (NY Fed president) and Philip Jefferson (Vice Chair), suggesting they may need more time/no urgency to hike rates. As such, the Fed leadership is clearly leaning in the direction of an October hold, meaning it will require a hot September CPI print (due 14 October) to make the meeting interesting. December remains our call on the next Fed hike.
In terms of some of the details, manufacturing is the bright spot with the fourth consecutive monthly rise and 72,000 jobs cumulatively added since the start of the year. This is consistent with strong survey readings for the sector, with advanced manufacturing (pharma, transport & aerospace, computing & electronics) performing particularly well. Construction also increased, potentially tied to the strength in data centre activity.
Services are weaker though, with information (-10k), financial (-7k), professional business services (-9k) and government (-17k) all falling. The chart below shows that the 'big 3' job-creating sectors remain private education and healthcare services, government (state & local rather than federal) and leisure and hospitality. Cumulative employment change since December 2022 (000s) Source: Macrobond, ING "> Source: Macrobond, ING Labour market slack points to weak wage growth The rise in the unemployment rate shouldn’t be much of a surprise.
It is a low hire, low fire economy and the lack of opportunities has led to a hefty fall in labour participation. It can be a little choppy, and we saw a 485,000 increase in the labour force last month, lifting the participation rate to 61.8% from 61.6%. There are now similar numbers of unemployed people and job vacancies.
In early 2022, there were two job vacancies for every unemployed American. Unsurprisingly, this demand-supply swing lower is depressing wage growth, with the low quits rate suggesting further downside risks to wage growth relative to the current, already low, 3% rate. This suggests there is no inflation threat coming from the jobs market and reinforces our view that the market pricing of 3–4 Fed rate hikes looks too aggressive.
Low quits rate points to ongoing wage weakness Source: Macrobond, ING "> Source: Macrobond, ING US Uneemployment Jobs Federal Reserve Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author James Knightley Chief International Economist, US James Knightley is the Chief International Economist in New York.
He joined the firm in 1998 in London and has been covering G7 and Western European economies. He studied economics at Durham… In this article September jobs report was weaker on all three key metrics Labour market slack points to weak wage growth
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