Fed Watch – 10/2/2026

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It’s been a big day for a week, but what does that mean for fed? Looking forward. Hi, I’m Lauren Saidel-Baker, and welcome to this October 2nd edition of ITR Economics Fed Watch. We got a lot of economic data this week. So let’s run down what changed, what hasn’t. And really where does the outlook go from here. The big one was GDP. We got the second quarter GDP revision actually revised upward. You’ll remember that previously this print had come in at one point five percent growth for the second quarter. Now the new number that came out on Wednesday two point two percent. So a significant move upward shows that the economy had been growing at a higher pace than we previously thought.

But I really want to circle back to that is second quarter GDP. You might have noticed that we are rounding out the end of this year. It is now October, so this is very far backward. Looking at this point. It’s not giving us a forward view of growth, but really just where we have been, how the economy has been growing. So a good print, some good news. I want to be clear, this doesn’t change anything for our ITR economics outlook. We are still holding to our GDP forecast. More on that in the trends report. Or talk to your ITR economist if you have additional questions about how GDP is trending and really if that correlates to you and your business. but additional data came out mostly about jobs.

So turning to the labor market now, we got the, the jolts or the job openings and labor turnover survey. openings were slightly lower than expected when that data came out. However, the big takeaway for me is that layoffs were very, very low. So this brings us back to what I’ve been calling that low, hire low fire type of labor market. You’re really not more likely to lose your job if you do lose your job. It’s harder than really to find a new one. So we’re getting different narratives pulled in from different data sources. This is not a hot job market. This is not a cool job market. It’s just kind of a different job market. And I am going back to that low, hire low fire wording because I think that captures really what’s going on right now. Now, some of that previous data might explain why we saw consumer confidence come in a little bit lower. That did miss expectations.

But if you’ve been following us here at ITR Economics, you know that we don’t put much confidence in consumer confidence. So that is not the trend of the economy that we really need to follow going forward. The big number, the one that just came out this morning, nonfarm payrolls, that was actually a pretty large miss only twenty nine thousand jobs. The unemployment rate did tick up slightly to four point two percent. The additional news to that kind of more downside, adding insult to injury, is that we also lost about sixty thousand jobs in revisions to prior month data.

So this was a big print today, the jobs report, this was the last one before the midterm election. It will very likely get a lot of news coverage just for that simple fact of factoring into the political calendar. But let’s not overreact to just one data point. We’ve been talking a lot about inflation on this program, and I won’t belabor that. We didn’t get great new detail this week, so we’ll wait until we have some of those numbers to unpack in future weeks. But turning to the other side of the Fed’s dual mandate to the labor market, it seems like there is additional shakiness on that leg of the stool. Today’s print, it took the ten year Treasury yields down slightly.

Those had been at very high levels highest in something like nineteen years, and it did actually move the odds lower for a rate increase in October. Now, we’re still looking at the market pricing in more than a fifty percent chance of a rate hike coming in December. And in fact, there is still a significant minority expecting that we’ll see fifty basis points of rate increases by the December meeting. So how do we round out the rest of this year? Well, at the end of the day, it seems like rates are still going up. Not down, not even hanging in sideways here holding at the current level. So inflation is still the predominant concern, even when we get a slightly weaker week of data on the labor market, as we did this week, it’s important to keep this all in context. We will be right here doing that for you. I hope you stick with us as we turn back next week to some of those inflationary drivers. Yet again, that is the predominant thing we want to be watching for rate moves going forward. We hope you’ll do it right here with us on ITR Economics Fed Watch.