Jerome Powell’s decision in September 2025 to lower interest rates was undoubtedly the correct call. But by then, he was already late. When the unemployment rate hit 4.3%, it should have raised red flags long before—that figure calmed nerves, but it masked serious strain in the labor market. Beneath that headline rate, job growth had slowed, worker participation was weakening, and hidden losses were mounting.

What Did the Recent Data Revision Reveal?

In September 2025, the Bureau of Labor Statistics (BLS) issued a benchmark revision showing the U.S. had 911,000 fewer jobs between March 2024 and March 2025 than previously reported. Bureau of Labor Statistics+1
This adjustment wasn’t just a rounding error—it dramatically altered the picture of job creation, suggesting that much of what seemed like economic strength was overstated. Rather than robust labor growth, the economy was closer to stagnation. Reuters+1

Why Should the Fed Have Recognized Weakness Earlier?

Several indicators were quietly deteriorating:

• The labor force participation rate hovered around 62.2–62.3% in mid-2025, near multi-year lows. Trading Economics+2Bureau of Labor Statistics+2

• Measures of underemployment and people wanting work but not counted in the unemployment figures were elevated. For example, in August 2025, roughly 6.4 million people said they wanted jobs but were not actively looking. Bureau of Labor Statistics

• Job additions in recent months were weak. The August 2025 report showed only about 22,000 new jobs, far below what’s needed just to keep up with population growth. AP News+2Financial Times+2

These signs should have pushed the Fed toward easing much earlier. Instead, policy stayed restrictive while data suggested mounting slack.

How Did the Fed Mis-interpret the Labor Market?

Powell and the Fed appeared to rely too heavily on some headline numbers and under-weigh broader, but less-publicized, measures of labor market distress. The unemployment rate, while important, doesn’t capture everything:

• Workers who want jobs but have stopped looking

• Part-time workers who want full-time work

• Long-term unemployed (27+ weeks)

These groups were growing, and participation rates were slipping. Yet through much of 2024, policy was still based on projections that assumed the jobs picture was stronger than it really was.

What Were the Costs of Waiting?

When rates stayed above 5% into 2024 and through much of 2025, the effects rippled:

• Hiring slowed, especially in sectors sensitive to borrowing costs.

• Some workers gave up looking for work entirely, dropping out of the labor force.

• Wage pressure softened, and investment cooled.

By the time Powell finally cut, many Americans had already felt the pain: slower wage growth, fewer opportunities, and prolonged economic uncertainty.

Could the Delay in Cutting Be Justified?

To be fair, there were reasons Powell (and others) might have thought patience was necessary:

• Inflation remained a persistent concern through 2024, especially given supply-chain constraints and energy price volatility. Cutting too early risked stoking inflation again.

• Benchmarks and data revisions always carry uncertainty. The February and March 2024 benchmark revisions (for example) were large, but the final numbers were often somewhat smaller. PolitiFact+1

• The cost of moving too soon could include damaging inflationary expectations or needing to reverse course, which carries its own consequences.

What Does the September Cut Actually Mean?

When Powell finally cut rates in September 2025, it was an admission that the labor market was weaker than earlier data suggested. But even then, the move largely reflected what had already been revealed by revised numbers, not what was being reported in real time.

Moreover, while inflation had eased somewhat, it wasn’t low enough to fully clear the decks. The cut was necessary—but perhaps only brought policy back to where it should have been months earlier.

What Should Be the Takeaways for Future Fed Policy?

Moving forward, the Fed and other policymakers might want to adjust how they interpret, trust, and act on labor market data:

• Elevate broader measures of labor hardship (underemployment, marginal attachment, long-term unemployment) rather than focusing mostly on the headline unemployment rate.

• Give more weight to participation rates, and track slack in the labor force more closely.

• Build policy frameworks that anticipate data revisions and treat current data with humility—if multiple indicators are signaling weakness, act early.

• Recognize that inflation concerns are valid, but delaying policy action too long introduces its own risks—economic drag, lowered growth, and human suffering.

Conclusion

Jerome Powell’s rate cut in September was the right move—but the evidence suggests it should have come much earlier. From the large job revisions to slipping participation rates and weak recent job creation, the signals of labor market trouble were there throughout 2024. The official 4.3% unemployment rate masked deeper problems. Had the Fed acted earlier, many of the costs—economic, personal, and social—might have been mitigated. History may remember this as a case of “right decision, wrong timing.”

Sources

¹ Fox Business, “Labor Department revises jobs data showing 911,000 fewer positions,” September 2025 

² ABC News, “US economy added 911,000 fewer jobs than previously reported,” September 2025
³ CNBC, “Jobs report revisions September 2025,” September 2025 

⁴ ABC News, “US economy added 911,000 fewer jobs than previously reported,” September 2025 

⁵ American Action Forum, “The 2025 Preliminary Benchmark Revisions,” August 2025 

⁶ BLS Employment Situation Summary, August 2025 

⁷ News Nation, “Jerome Powell weighs in on AI, immigration and tariffs,” September 2025 

⁸ Camoin Associates, “US Labor Force Participation Data,” March 2025 ⁹ BLS Employment Situation Summary, August 2025 

¹⁰ U.S. Chamber of Commerce, “Understanding America’s Labor Shortage,” November 2023 

¹¹ BLS Employment Situation Summary, August 2025

¹² BLS Employment Situation Summary, August 2025 

¹³ BLS Employment Situation Summary, August 2025 

¹⁴ American Action Forum, “The 2025 Preliminary Benchmark Revisions,” August 2025 

¹⁵ BLS Current Employment Statistics methodology documentation 

¹⁶ U.S. Bank, “Federal Reserve Calibrates Interest Rate Policy,” September 2025 

¹⁷ U.S. Bank, “The Impact of U.S. National Debt on Investments,” February 2025 ¹⁸ BLS Employment Situation Summary, August 2025