(Pablo Martinez Monsivais/AP)
Nailed it.
The Federal Reserve must be relieved.
In September, the Federal Open Markets Committee, the Fed's policy setting arm, decided not to raise its benchmark rate, which has been near zero for seven years.
Ahead of the meeting, there had been little certainty about what the Fed would do, but a good number of economists believed that the economic data had improved enough to compel the Fed to raise rates.
And then on Friday, we got the first jobs report since that report, and it simply awful all around.
In September, the US economy added 142,000 jobs, fewer than expected, while the August report was also revised down to 136,000 from 173,000, making it the second-worst month of 2015. The unemployment rate held steady at 5.1%, a seven-year low, but the labor-force-participation rate fell to a 38-year low.
Perhaps most discouragingly, wage growth was flat in September.
To be sure, one or two months of data do not make a trend, but the Fed's decision to be cautious certainly looks like the right one.
Priya Misra, head of global rates strategy at TD Securities, told Business Insider following the report:
"The Fed has been vindicated for waiting. They wanted to see what the impact of the tightening in financial conditions and weakness abroad would be on the US. Today's report was unequivocally weak. It's only one data point, so it's not clear that it is the start of something more ominous, but the Fed should wait for more data."
And although the Fed is fixated on the incoming economic data, it's also clearly paying just as much attention to the evolution of longer-term trends.
(Deutsche Bank)
The Fed's mandate for setting monetary policy rests on two pillars: full employment and stable inflation.
On the latter, the Fed had said it was confident that inflation would progress towards its 2% target.
The labor market, however, is approaching the Fed's goals, even with Friday's less-than-stellar report.
In a speech last week, Fed chair Janet Yellen said that, "Although other indicators suggest that the unemployment rate currently understates how much slack remains in the labor market, on balance the economy is no longer far away from full employment." An assessment that is unlikely to get a material revision after Friday's numbers.
But in the view of chair Yellen, there are still structural problems to overcome, with Yellen saying last week that, "On a cyclically adjusted basis, the labor-force-participation rate remains low relative to its underlying trend, and an unusually large number of people are working part time but would prefer full-time employment."