Federal Reserve Governor Lisa Cook said on September 30 that the U.S. labor market is broadly stable, but inflation has remained above the 2% target for more than five years.

She reiterated her commitment to bringing inflation back to target while keeping the labor market strong, and noted that rising energy and housing costs have placed significant pressure on rural households.

Backing September Rate Hike as Latest Inflation Data Remains Above Target

Cook made the remarks at an "Investing in Rural America" conference held in Asheville, North Carolina.

She said that whether residents live in rural or urban areas, inflation being too high for too long is a problem that must be addressed.

She also mentioned that she joined other committee members in supporting a 25 basis point rate hike at the September policy meeting.

The Fed unanimously decided on September 16 to raise the target range for the federal funds rate to 3.75%–4%.

The policy statement at the time noted that the U.S. economy is expanding steadily, domestic spending remains resilient, productivity growth is strong, and capital investment is robust, but inflation remains elevated.

Data released the same day painted a picture of both consumption growth and price pressures.

The U.S. August personal consumption expenditures price index rose 3.4% year-over-year and 0.3% month-over-month. Core PCE, which excludes food and energy, rose 3.0% year-over-year and 0.2% month-over-month, still above the Fed's 2% target.

Consumer spending continued to grow. August nominal personal consumption expenditures rose 0.9% month-over-month, or 0.6% after adjusting for prices. Personal income rose 0.2% month-over-month, and the personal savings rate stood at 4.1%.

Employment Broadly Stable, Hiring Growth Still Uneven Across Industries

Cook's assessment of the employment situation was relatively calm.

She said the U.S. unemployment rate remains low by historical standards, and initial jobless claims, which reflect layoffs, also remain low.

Hiring momentum in recent years has been weaker than in the early stages of this economic expansion, but job growth picked up during the summer.

The ADP report released on September 30 showed that U.S. private employers added 90,000 jobs in September, while the August gain was revised down from 38,000 to 36,000.

ADP Chief Economist Nela Richardson said that after three consecutive months of slowing, job creation rebounded and wage growth remained solid.

New positions remained unevenly distributed. Education and health services added 55,000 jobs, while leisure and hospitality added 22,000.

Financial activities shed 16,000 jobs, and professional and business services lost 11,000.

Manufacturing and construction added 17,000 and 15,000 jobs, respectively.

Rural areas also face long-term structural employment challenges.

Previous Fed research has noted that automation, shrinking employment in traditional industries, and the concentration of high-skilled jobs in densely populated areas have had a significant impact on rural workers, particularly prime-age men and those with lower levels of education.

Energy and Housing Costs Weigh Heavily on Rural Households

Cook made the cost of living for rural residents a key focus of her speech.

She pointed out that rural households typically must drive longer distances for commuting and accessing services, with transportation accounting for about one-quarter of total household spending, compared with less than one-fifth for urban households.

As a result, rising energy prices have a greater impact on rural household budgets.

Housing affordability has also undergone notable changes. Research cited by Cook showed that from March 2020 to March 2023, home prices in rural counties, small metropolitan areas, and low-density suburbs of large metropolitan areas rose by more than one-third, while the average increase in the most densely populated urban counties was 21%.

This reversed the pre-pandemic pattern in which home price gains were mainly concentrated in cities and high-density areas.

Related research found that the price-to-income ratio in rural counties rose from 2.5 times in 2017 to 3.9 times in 2023, with affordability deteriorating even in areas that had previously enjoyed lower housing costs.

Cook said rural housing inflation has gradually returned to its pre-pandemic pattern since 2023, but housing costs remain an important driver of overall inflation.