Fed Chair Focuses on Prices After US Economy Sheds More Jobs Than Thought

Kevin Warsh has emphasized that prices will be the central bank's priority during his tenure as chair of the Federal Reserve, even as new figures show that the labor market remains on shaky footing. During his keynote address at the Jackson Hole Economic Policy Symposium on Friday, Warsh said that he was "impressed" by the overall performance of the economy, with both consumer spending and employment conditions appearing healthy. However, he said that the data was "more concerning on price stability," and that the Fed's "predominant focus right now should be on prices." The Fed held rates steady at its most recent meeting, but Warsh, who was nominated by President Donald Trump to succeed Jerome Powell, said that the central bank could need to raise interest rates to bring down inflation.

The BLS revised down employment growth by 79,000 jobs for the period, equivalent to 0.1 percent of total nonfarm employment. This preliminary revision is over ten times smaller than last September, when the BLS estimated that nonfarm employment should be revised down by 911,000 jobs. Consensus expectations were a positive revision of 200,000 jobs.

The annual benchmark revisions are part of the BLS's long-standing process for improving the accuracy of employment data while still delivering timely initial estimates. In recent years, those revisions have been sizable and downward, potentially reflecting weaker payroll survey response rates as well as broader economic factors. Ahead of the release, market analyst Ghiles Guezout wrote that the “spectacular revisions of recent years” had made the revisions a more important touchstone for investors and policymakers, and that downward revisions would “reinforce the view that the U.S. labor market slowdown has been deeper than previously thought.” The past two employment reports for July and August had already come in below expectations even before the updated figures were released on Friday.

Before this, economists had seen the labor market as gaining strength and putting less pressure on the Federal Reserve, which has been focused on resurgent inflation since the beginning of the Iran war. This is a developing story.