What October’s jobs report means for the Fed

The market's shifting focus to next week with two key events on the horizon, the election and the Federal Reserve decision. The main economic data for the central bank to consider next week in the books, but it was a mixed picture and leaving some questions as to what the Fed's next move will be. Joining us now, Jim Bullard, former St. Louis Fed President and Dr. Samuel L. R. Allen, Dean of the Mitch Daniels School of Business at Purdue University. Jim, thank you so much for being with us. We really appreciate it. So as we said, the data has been mixed. We keep talking today about today's data that was noisy, it was muddy, it was confusing. What does the Fed do with all of the data and how it might interpret it? That was a low number today, but everyone knows that this was affected by hurricanes and by strike activity. Governor Waller of the Federal Reserve Board said before blackout that he thought maybe 100,000 jobs would be obscured because of those events. So if you add 100,000 back in, you get to 112,000, which still isn't all that big of a number. But if you average them from the last jobs report, which was higher, then you get something that's probably in the range of the truth about the run rate for the U.S. jobs market. Also, I think other indicators don't seem to be indicating any fall off in labor market activity. So it looks like the Fed's really on track to look through the noise and continue toward a 25 basis point decrease in the policy rate at the next meeting. Do you think though, Jim, because it won't be just this metric, I'm sure there'll be other economic indicators we get that maybe seem a little noisy, a little messy. So are central bankers operating in a bit of a fog here and they have to kind of hope that on the other side of this fog, the underlying trends just haven't shifted much? Yeah, I think it's probably a bit of an illusion that the fog will ever go away. There's always quite a bit of uncertainty in this world. So you have to do the best you can to try to extract the signal from the noise. But we have other indicators and GDP, for instance, has come in ahead of potential faster growth than the potential growth rate, both in the second quarter and now in the third quarter. So it doesn't really look like we're on the cusp of any kind of recession or anything. So I think we have pretty good overall economic performance. And I think we can look through this jobs report and conclude that the labor market is still doing relatively well. Unemployment, for instance, staying at 4.1% in this report. And then I think the committee is in pretty good shape to continue on this path to try to get inflation all the way down to 2%. And where are you? We always like to talk about landings, what kind of landing we're going to get, Jim. I'm curious where you are in the landing camp, what kind we'll have. I've been a big advocate over the last two years that we could achieve a soft landing. And I actually think we have achieved a soft landing. You can't really expect all of these numbers to go exactly to their long run values. Inflation exactly at 2%, growth rate exactly at 2%, unemployment rate exactly at the natural rate of unemployment. So I think we're pretty close on all those metrics. And so I think we have achieved a soft landing. And now going forward, other things will happen. Who knows what kind of shocks will hit the U.S. economy in 2025. And there'll be something new to worry about at that point. But I think the committee has been very successful and Chair Powell has been very successful in getting inflation down from a peak, which the CPI inflation was actually over 9% at one point. Now it's way down from that level and they'll be able to zoom in to 2% as we go through 2025.