“Many participants noted that reported payroll gains might be overstated,” an account of the July FOMC meeting released on Wednesday afternoon in the US read.

As it turns out, those participants were correct. Reported payroll gains were indeed overstated. And by a whopping 818,000, according to the BLS’s first attempt at revising the jobs tally for the 12 months ended March of 2024.

The July Fed minutes were published just a few hours after the government’s annual benchmark payroll revisions, which suggested hiring was much slower than initially reported. “Several” Fed officials fretted late last month that “payroll gains may be lower than those needed to keep the unemployment rate constant with a flat labor force participation rate.”

Recall that markets were thrown into turmoil less than 48 hours after the conclusion of last month’s policy gathering. On August 2, the BLS said the unemployment rate rose two-tenths, triggering a widely-followed recession “rule” and fanning the flames on a burgeoning growth scare sparked by a concerning ISM manufacturing report the previous day. By noon on August 5, short-end rates were in full-blown panic mode and traders were placing bets on an inter-meeting, emergency Fed cut.

Things calmed down since then, but the Fed’s pushing its luck. Fed hiking cycles always break something, and this one’s seen its share of close calls from a meltdown in the UK government bond market to a string of US bank failures. It’s just a matter of time before something else goes wrong. US inflation’s at or near 2% on several lookbacks (albeit obviously not on the 12-month readings) and the Fed’s been parked at terminal for 13 months. It’s time to take the proverbial win even if “win” is a hopeless euphemism.

The July minutes flagged the lower hiring rate from the JOLTS report, illustrated below. This data point doesn’t get enough attention, but the Fed’s apparently aware.

Recall that hires slipped to the lowest since the spring of 2020 in recent months. Even if employers are reluctant to let workers go, they’re likewise becoming more hesitant about adding to payrolls.

Although the account of last month’s meeting suggested the Fed still viewed the US jobs market as strong, there was a clear shift in the Committee’s thinking around the balance of risks. That shift was enshrined in the policy statement.

The minutes found the Committee agreeing that “indicators of labor market conditions merited close monitoring.” “Several” officials said employers in their districts “were actively managing head counts through selective hiring and attrition.” And so on.

On the inflation front, “some” meeting participants described conversations with business contacts who said “pricing power was waning, as consumers appeared to be more sensitive to price increases.” Those anecdotal accounts were described as corroborative vis-à-vis recent inflation data which “increased [the Fed’s] confidence that inflation was moving sustainably toward 2%.”

The minutes suggested there was near unanimity around the notion that “the factors that had contributed to recent disinflation would likely continue to put downward pressure on inflation in coming months.” A “vast majority” already supported a rate cut in September — so, pretty much everyopne was on board before the Sahm rule triggered and before the accompanying market fireworks.

If you’re wondering whether anyone would’ve voted for a preemptive rate cut last month, the answer’s “yes.” “Several [participants] observed that the recent progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range 25bps at this meeting or that they could have supported such a decision,” the minutes said.

Again: That was before the jobless rate moved up another two-tenths. “Some participants,” the account of the meeting noted, worried that given the recent softening in labor market conditions, “the risk had increased that continued easing could transition to a more serious deterioration.”