Payroll revisions shift the case for another Fed hike onto inflation

The 60,000 splits almost evenly between the two months: July lost 31,000 from its prior estimate and August lost 29,000 ^[15]. When the Fed hiked on Sept. 16, July and August together showed 183,000 jobs ^[8][16]. They now show 123,000 ^[16].

CryptoSlate noted that the revision corrects jobs already counted and adds no new September losses ^[4]. Averaged with September, payrolls grew by about 50,700 a month over the quarter ^[18].

September on its own settles little. BLS puts its approximate significance thresholds at 122,000 for a monthly payroll change and 650,000 for the household survey, and September's changes fell below both ^[17]. The 29,000 payroll gain is about a quarter of its threshold ^[26]. The household survey counted 406,000 more people employed, but its labor force grew by 485,000 ^[9], leaving roughly 79,000 more people unemployed ^[25].

The September hike was the Fed's first in three years and followed five straight holds, the last of them a 9-3 July vote in which three regional bank presidents dissented in favor of a quarter-point increase ^[11]. From here the committee could read the revisions as removing its labor rationale and stop after one move. It could hike again on inflation alone, with core PCE still at 3.0% in August against a 2% goal ^[14]. Futures favor that outcome for December ^[19]. Or hiring could firm and restore the labor argument.

I think the revisions carry more weight than the September print. They move two months the Fed had in hand when it hiked, while the 29,000 sits below BLS's significance threshold ^[17]. A December hike would then be justified by prices, with the labor half of the September argument gone. CryptoSlate made a narrower version of the point: weak hiring and slower wage growth give less support for tightening meant to restrain labor demand ^[6].

The counter-thesis has two parts. Participation rose to 61.8% from 61.6% ^[9], evidence a hawk can cite of a labor market still absorbing workers. And SchiffGold, the bullion dealer founded by Peter Schiff, ran its analysis under the headline "The Fed Is Going To Ignore Another Weak Jobs Report", arguing the year-to-date payroll total still underperforms despite the household survey's strength ^[24]. Stronger inflation or hiring would undo the softer reading, CryptoSlate wrote ^[5].

Gold rose even as the dollar index added 0.22%, a move that raises the cost of dollar-priced metals for buyers in other currencies ^[21]. "We continue to view rising government debt levels as a structural tailwind for the yellow metal," UBS analyst Giovanni Staunovo told Reuters ^[22]. Total U.S. debt topped $40 trillion for the first time in August ^[23].

CryptoSlate argued that a softer labor case could ease the discount-rate threat to bitcoin ^[29], and in the same piece cited a February 2023 New York Fed staff study that found bitcoin largely unresponsive to monetary and macroeconomic surprises in an intraday event study ^[28].