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How FOMC Members Assessed the US Labor Market in September

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Strength of the labor market acknowledged

In the September meeting, FOMC (Federal Open Market Committee) members acknowledged that the labor market has continued to show strength. Members noted that job gains have remained solid and that the unemployment rate has remained low.

Participants also discussed the developments in wage growth, citing lower levels of wage growth and employee compensation due to competitive pressures on employers.

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Labor market conditions impacted by hurricanes

FOMC members also noted that the labor market conditions could take a hit due to the hurricanes in August and that this was evident in the October non-farm payrolls report, which indicated a loss of 33 thousand jobs in September.

Members felt, however, that the rebuilding efforts in the hurricane-impacted areas could lead to increased demand for housing sector (ITB) (XHB) workers and could even help increase wages in those regions.

Unemployment is not a problem for the Fed anymore

The September FOMC meeting minutes indicated that members were content with labor market conditions and hawks in the FOMC were using the labor market strength to advocate another rate hike in December. There were concerns regarding labor productivity and a few members saw further increases in labor utilization, which continue to remain below the pre-recession levels.

This could help explain the reasons for the failing of the Philips curve. According to the Phillips curve, lower levels of unemployment should lead to a higher level of inflation (TIP). For the time being, both markets (BND) (SPY) and the Fed don’t seem to be worried about the labor market.

In the next part, we’ll discuss FOMC members’ views of equity markets.

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