Fed Talk
Chicago Fed President Austan Goolsbee joined CNBC this morning with some mixed messages on the labor market. He first described conditions as “pretty stable,” only to later admit they’re deteriorating. We’re not sure what more the Fed needs to see to acknowledge that the labor market is weakening — ADP has reported job losses in three of the past four months.
Goolsbee also discussed the Chicago Fed’s new unemployment indicator, which estimates the jobless rate would have held steady at 4.3% in the latest BLS report. But the actual reading sits at 4.34% — just a fraction away from rounding up to 4.4%. The internal probability breakdown even showed a strong chance of 4.4%, which raises some eyebrows, since a higher number would have added real pressure on the Fed.
Digging deeper, the Fed’s own charts show a clear trend: layoffs are rising, and hiring among the unemployed is slowing. It’s hard to square that with the “stable” narrative the Fed continues to push.
On inflation, Goolsbee said he’s concerned about the uptick in services prices. But most of that move came from Owners’ Equivalent Rent — a survey-based estimate of what homeowners think they could rent their homes for. It’s a questionable metric, and it’s overstating Core PCE inflation by roughly 0.3%. Add in the impact from tariffs (another 0.3% to 0.4%) and Portfolio Management fees (around 0.3%), and you’re looking at several artificial boosts to the reported 2.9% Core PCE number.
When you strip out those distortions, Core inflation is closer to 2.0%—or even 1.9% depending on how you account for tariffs. That’s right in line with real-time gauges like Truflation, which shows overall inflation hovering near 2%. Meanwhile, oil prices have fallen sharply, with WTI crude back near $60.
All told, the data supports a strong case for a 25bp rate cut at the Fed’s October 29 meeting.
We also heard from New York Fed President John Williams, who said bond buying remains a normal part of the Fed’s toolkit. Notably, he didn’t exclude mortgage-backed securities (MBS) — opening the door for potential quantitative easing if the economy softens. That would be very supportive for mortgage rates going forward.