Fed’s September Rate Cut: Sensible, But Not a Hiring Game-Changer

The Fed’s September 17 decision to cut its benchmark interest rate by 25 basis points, bringing it down to a range of 4.00–4.25%, was firmly grounded in the data, not just an educated guess. Nonfarm payrolls grew by only 22,000 jobs in the latest report, far below the 2022 monthly average of over 300,000. Unemployment has crept up to 4.1%, the highest level since late 2021. At the same time, inflation has slowed to 2.3% year-over-year, down from a peak of 9.1% in June 2022. The Fed’s own projections show a bias toward more easing if weakness persists.

But these numbers only tell part of the story. Labor force participation is stuck at 62.4%, well below its 2019 peak of 63.3%. Immigration, a crucial source of new workers, has collapsed, 2024 saw net international migration drop by nearly 60% compared to the prior decade’s annual average, according to Pew. The foreign-born labor force actually shrank last year, reversing decades of steady growth.

So while the Fed’s rate cut was well-supported by the data, history suggests it won’t single-handedly turn around hiring. When structural factors like demographics and immigration drive the slowdown, monetary policy can only do so much.