Axios Macro

A white telescope

It's a busy week ahead in Macroland. Courtenay is on the road for an event with New York Fed president John Williams tomorrow, then the National Association for Business Economics' annual meeting starting Sunday. Neil will hold down the fort in Washington as the IMF and World Bank annual meetings commence next week.

  • Today, we tee up tomorrow's big jobs report and hear from the IMF chief on what she sees ahead for the world economy.

🗣 Situational awareness: Lisa Cook delivers her first speech as a Federal Reserve governor at 1pm EDT today, focused on the economic outlook, followed by a Q&A. Livestream here.

Today's edition, edited by Javier E. David and Katie Lewis, is 668 words, a 2½-minute read.

1 big thing: September's just-right jobs scenario

Illustration of a crystal ball with a briefcase inside
Illustration: Sarah Grillo/Axios

When the monthly jobs numbers are released tomorrow morning, what counts as "good" can vary depending on where things stand in the economy. That's especially true at this precarious moment.

  • As we await September jobs data, it's worth asking what a dream jobs report would even look like — the kinds of numbers that would give the Fed comfort that inflation is coming down but not suggest masses of people will soon be out of work.

Driving the news: Forecasters expect the numbers, due out at 8:30am EDT, to show a deceleration in job creation (250,000 positions added, down from 315,000 in August) and the unemployment rate holding steady at 3.7%

  • Other labor market indicators this week have suggested the labor market is starting to cool a little, while remaining basically healthy. This morning, the Labor Department said jobless claims surged to 219,000 last week, up from 190,000.
  • Meanwhile, August job openings data plunged.

State of play: In the ideal scenario for jobs, the number of people in the labor force rises, boosting the supply side of the economy — even if that means a rise in unemployment, as not all of those would-be workers find jobs.

  • Combined with the recent drop in job openings, that would be a sign the labor market was coming into better balance, with the number of people looking for work and the number of jobs available in better alignment.

What they're saying: "The most benign Goldilocks scenario for a Fed now looking for a cooler bowl of porridge is for the unemployment rate to rise purely on a sharp increase in participation in the labor force," Diane Swonk, chief economist at KPMG, tells Axios.

The report will also include data on average hourly earnings, an important signal of whether wage pressure is abating. Analysts expect a 0.3% rise, which would translate into a 5.1% rise in wages over the past year.

  • In the dream scenario — again, one in which there is disinflation but no severe recession — that would come down a couple of ticks, perhaps to 0.1%, former Pimco chief economist Paul McCulley tells Axios.
  • McCulley says he also would hope to see net job creation in the 200,000 range, a significant drop from the 378,000 average in the last three months.

The bottom line: The jobs numbers always matter, but this month they matter most for what they indicate about the likelihood of a soft landing.

2. IMF chief's warning: Worse before it gets better

IMF managing director Kristalina Georgieva during an event at Georgetown University today. Photo: Ting Shen/Bloomberg via Getty Images

Kristalina Georgieva, the International Monetary Fund's managing director, says the global economy is like a ship in choppy waters: "We need all the wisdom we can muster to steady the ship and navigate through what lies ahead."

  • The comment came during a speech today at Georgetown University, which set a gloomy tone for the fund's annual meetings in Washington next week.

Why it matters: The stark reality facing policymakers is that the world economy is exiting an era of relative predictability, with very low interest rates and low inflation, Georgieva said before an audience of students (many of whom have never lived through any other conditions).

  • What lies ahead is more economic volatility, "a world in which any country can be thrown off course, more easily and more often."

The intrigue: However, Georgieva did not mention the IMF's eyebrow-raising statement last week that criticized the U.K.'s tax cut proposals (which have since been scaled back).

  • Yet she did warn that any fiscal measures should be well-targeted: "When the monetary policy is stepping on the brakes, fiscal policy should not step on the accelerator. Otherwise, we are in for a rough and dangerous ride."
  • Georgieva also urged central banks to "do the right thing now" and continue to move to squash inflation even if the economy slows as a result.

The bottom line: "I'm a natural optimist, but ... I need to say it's more likely to get worse than to get better," Georgieva said, adding the IMF will again revise down projections for global growth when its new outlook is released next week.