MNI INTERVIEW: Fed's Risk Management Cuts Not Enough - Revelio

The U.S. labor market will continue to soften and the Federal Reserve's 50 basis points of interest rate easing so far this year will not be enough to shore up hiring, private data provider Revelio Labs’ chief economist Lisa Simon told MNI.

"It just feels like what's happening is we're sliding off a muddy hill," she said about the labor market. "I think we'll sort of see a slow sliding downwards into negative territory when it comes to job gains."

The Federal Reserve at its October meeting approved its second straight interest rate cut, though Chair Jerome Powell threw doubt on whether another risk management reduction is coming in December. 

"I think inaction in the face of uncertainty might not be the right move here," said Simon about the Fed's December meeting. "No action for the December meeting would probably be a mistake given the direction of travel we observe."

SLOW DETERIORATION

Workforce analytics data from Revelio Labs showed 9,100 jobs were lost in October, with government payrolls declining by 22,200. "I wouldn't expect things to increase or to be much better in the coming months,” Simon said. (See: MNI INTERVIEW: Tariff Price Boost Still Percolating - Schoenle) 

Revelio estimates monthly changes in hiring and unemployment by looking at over 100 million professional profiles sourced from professional networking websites. 

Simon said Revelio data likely undercounted government payrolls in October and the drop could be bigger going forward. "More broadly, I think we are yet to see the even bigger outflows," she said. "Perhaps the outflows will retroactively get even bigger as people update their profiles out of the government." 

A 22,000 gain in Education and Health Services in October helped buoy overall payrolls and looks likely to provide support to private payrolls. "There's not necessarily a reason to expect this to change very soon, although one can expect perhaps a slowdown in hiring in education further down the line,” she said.

"Declines in job postings. Hiring indicators were down. The only thing that was up was with salaries from new job postings. We saw a slight uptick there, 0.6% month over month."

Simon isn't expecting any sudden downshifts in hiring. "I don't think it's sort of an inflection point or anything of the sort. It's sort of just a further, slow deterioration of the conditions."

BREAKEVEN HIGHER

While a broader look at available indicators suggests the BLS unemployment rate has perhaps been steady, hiring has been low relative to Simon's estimate of breakeven hiring. 

"We put our breakeven rate, given what we see in terms of growth rates of the workforce, somewhere between 32,000 and 97,000 jobs," she said, casting doubt on the Current Population Survey's reports of 2.2 million fewer immigrants in 2025. 

"Our expectation is that the breakeven rate is probably higher than what most people expect it to be," Simon said.