Siegel Sees Warsh Gift in Weak September Jobs Print
Wharton economist calls 29,000 payroll miss 'wonderful' for new Fed chair's inflation mandate
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Jeremy Siegel calls September's weak 29,000-job gain a welcome development for Fed Chair Kevin Warsh, arguing labor market cooling gives the Fed room to…
A 'Wonderful Report' for Warsh
Jeremy Siegel, the veteran Wharton finance professor and WisdomTree chief economist, didn't mince words on CNBC's Squawk Box this morning. In his view, September's sharply disappointing jobs report is precisely the data the new Federal Reserve chair needed.
The Bureau of Labor Statistics reported that nonfarm payrolls rose just 29,000 in September, badly missing the 84,000 consensus. The unemployment rate ticked up to 4.2% from 4.1%. For a labor market that looked resilient just a month ago, the reversal was stark. August's blockbuster 162,000 gain had reinforced the narrative that the Fed would need to stay hawkish. That narrative lasted about four weeks.
Siegel's framing is worth unpacking. He's not celebrating weakness for its own sake. He's observing that Chair Kevin Warsh, who took over in May amid an unusually contentious confirmation process, now has political cover to hold rates steady without appearing to capitulate to White House pressure. That's a meaningful distinction in the current environment.
The Political Context for Warsh
Warsh's ascent to the Fed chair was anything but smooth. The Senate confirmed him in May on a 54-45 vote, the most divisive confirmation in Fed history. Every Republican and just one Democrat, Pennsylvania's John Fetterman, voted in favor. Warsh promised a "reform-oriented Federal Reserve" in his swearing-in remarks, and he's delivered on the rhetorical front: dropping forward guidance, shortening FOMC statements, and signaling a more hawkish posture on inflation.
But hawkish rhetoric without data support is a difficult position to maintain. President Trump, for all his public statements about wanting Fed independence, has been vocal about his preference for lower rates. Before this report, Warsh was in an awkward spot: inflation remains elevated, yet political pressure to ease was mounting.
A soft labor market changes the calculus. If the economy is cooling on its own, the Fed doesn't need to tighten further. And if the Fed holds steady rather than hiking, Warsh can point to the data rather than the political winds. That's Siegel's point. The labor market just gave Warsh an exit ramp.
What the Numbers Actually Show
The September report wasn't just weak on the headline. The revisions told a more troubling story. July's payroll count was revised from a gain of 21,000 to a loss of 10,000. August was marked down from 162,000 to 133,000. In total, the prior two months showed 60,000 fewer jobs than initially reported.
Health care added 17,000 positions, below its recent trend. Construction contributed 11,000, roughly in line with expectations. Government payrolls contracted by 17,000, with federal, state, and local employment all shrinking. Financial activities shed another 7,000 jobs, extending a decline that has now reached 129,000 positions since the sector peaked in May 2025.
Average hourly earnings rose just 0.1% month over month, landing at $37.81. That's a notable deceleration from recent prints. For a Fed fixated on wage pressures, this is welcome news. The combination of soft payrolls and cooling wages suggests the labor market is rebalancing without requiring additional policy intervention.
Historical Parallels and Regime Questions
Siegel has long argued that the Fed's models overweight lagging indicators like unemployment and underweight leading signals in financial markets. His interpretation of this report fits that framework. He sees a labor market that's already responding to the cumulative tightening of the past two years, and he thinks the Fed risks overtightening if it ignores these signals.
There's a historical analog worth considering. In 2007, the labor market softened several months before the recession officially began in December of that year. Employment figures are notoriously lagging, but the turn often arrives faster than policymakers expect. We're not forecasting recession here, but the pattern of downward revisions and slowing job creation bears watching.
The regime question is whether the Fed is transitioning from an inflation-fighting posture to something closer to neutral. Warsh has been explicit that he wants to focus the Fed's mandate more narrowly on price stability. A soft landing, if that's what's materializing, would validate that approach. But if this is the leading edge of something more concerning, the calculus changes quickly.
Market Reaction and the October FOMC
Markets initially rallied on the report, pricing in a high probability that the Fed holds rates at its October meeting. Traders have largely taken a hike off the table. The two-year Treasury yield, often a proxy for near-term Fed expectations, drifted lower in the wake of the release.
For equity investors, the reaction reflects the prevailing soft-landing thesis: slower growth that's sufficient to keep earnings on track while removing the threat of further tightening. That's the Goldilocks interpretation. The counterargument is that a 29,000 payroll print isn't soft, it's weak. And weakness has a way of compounding.
The next FOMC meeting runs October 28-29. By then, we'll have the October jobs report and another inflation read. If September turns out to be an outlier, perhaps distorted by calendar effects or seasonal adjustment noise, the hawkish case reasserts itself. If October confirms the trend, Warsh will have the data foundation he needs to hold steady through year end.
What to Watch in the Weeks Ahead
Three things matter in the next 2-4 weeks. First, initial jobless claims. The weekly claims data has been running at historically low levels, which made September's payroll miss surprising. If claims start to climb, the labor market softness is real. If they stay anchored, September may prove to be noise.
Second, the October inflation print. Warsh has staked his credibility on inflation discipline. If CPI accelerates while the labor market cools, he faces a classic stagflation dilemma. The Fed can't ease into rising prices, but it also can't tighten into a weakening job market without political and economic consequences.
Third, watch credit spreads. They've been remarkably well-behaved despite the macro uncertainty. Investment-grade and high-yield spreads remain tight. If credit starts to price in recession risk, that's a signal that the soft-landing thesis is losing adherents. For now, credit is giving the economy the benefit of the doubt. The question is whether that confidence is justified.