Fed's Kevin Warsh faces a hold after a hike and a shock jobs miss

Wall Street spent August bracing for the Federal Reserve to raise rates again. A single jobs report just flipped that bet, and the Fed's new chair is the one who has to explain the reversal.

On October 2, the Bureau of Labor Statistics reported that U.S. employers added just 29,000 jobs in September, far short of the roughly 84,000 economists had penciled in, while the unemployment rate climbed to 4.2%. The number landed two weeks after Federal Reserve Chair Kevin Warsh led a unanimous 12-0 vote to raise the federal funds rate a quarter point to a range of 3.75% to 4%, the Fed's first hike in more than three years. Markets had been told to expect more tightening. Instead, they got a labor market that looks like it's cracking.

The reaction was immediate. According to CME Group's FedWatch tool, the odds of an October hike collapsed from around 70% earlier in the week to roughly 14%, while the probability the Fed holds steady at its October 27-28 meeting jumped to about 83%. Gold jumped more than 1% within minutes of the release, with spot gold trading around $4,223 an ounce, according to market data cited by CoinPaper. Bitcoin briefly climbed above $87,000 the same morning, with the total crypto market cap around $3 trillion. When a jobs miss sends both gold and bitcoin higher at once, it's a tell that traders are pricing in a Fed that blinks, not one that stays tough.

Warsh's case for the September hike was built on three things he said had changed since the Fed's July meeting: the economy had strengthened, inflation hadn't slowed, and geopolitical tensions had intensified, according to his post-meeting remarks covered by CNN. At the Jackson Hole symposium in late August, he was blunter still, saying that summer's inflation readings, despite looking better than expected, didn't convince him underlying price pressure had actually eased. That's not a hedge. That's a chairman telling markets where he stands before a single vote was cast.

The September jobs report undercuts that read of the economy, at least on the labor side. You don't get 29,000 jobs and a rising unemployment rate from an economy that's strengthening. Warsh now has to decide whether September's weakness is noise or the start of a genuine slowdown, and he has to do it with a thinner data set than usual, because the Fed is still digging out from the damage of last year's shutdown.

The real data gap is a 2025 hangover, not a live shutdown

Here's the part that's easy to get wrong if you're not watching the calendar closely: there is no government shutdown happening right now. Congress passed a continuing resolution that President Trump signed on September 2, 2026, funding federal agencies through December 11 and heading off an October 1 lapse entirely, according to reporting from Breaking Defense and NBC News. The scare that dominated headlines through late summer didn't turn into an actual closure this time.

What the Fed is still contending with is the aftershock of the shutdown that did happen, the 43-day closure that ran from October 1 to November 12, 2025. That lapse was long enough that the Bureau of Labor Statistics couldn't collect the household survey data needed for an October 2025 jobs report at all. BLS ended up canceling it outright and folding October payroll data into November's report, which itself didn't come out until December 16, 2025, days after that year's Fed meeting, according to reporting from PBS NewsHour and Reuters at the time. The unemployment rate for that month was simply never measured. That's the kind of gap that doesn't heal itself; it leaves a notch in labor-market comparisons that rely on a clean October baseline.

So when the Fed sits down on October 28, it isn't flying blind because Washington is shut down today. It's working around a hole in last year's data that still distorts this year's trend lines, while also digesting a fresh and weaker-than-expected September report that arrived right on schedule. Those are two different problems, and conflating them misses what's actually making this meeting hard.

Frankly, the harder problem for Warsh is political, not statistical. He defied pressure from the Trump administration to cut in September and raised instead, a move CNN flagged at the time as a direct break with the White House's preferred path. Having just spent his credibility on a hike, reversing to a cut or even signaling one within weeks would read as capitulation to a bad jobs print rather than considered policy. Holding steady lets him wait for October and November data to confirm whether September was a blip or a trend, without either validating or abandoning the call he just made.

For anyone holding a position into October 28, the setup is straightforward even if the politics aren't. A hold is now the consensus bet, gold and bitcoin have already rallied on the chance the Fed pauses or softens its tone, and the next real catalyst isn't a shutdown ending. It's whether the October jobs numbers, whenever they're fully reported, confirm that September's miss was the start of something or just one soft month in an otherwise hawkish Fed's year.

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