Here’s What Experts Say About Powell’s Next Step In The Big Inflation War

news7f12/03/2022

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Here's What Experts Say About Powell's Next Step In The Big Inflation War

When an impressive jobs report hits the Federal Reserve Chair’s desk, it’s usually cause for celebration.

After all, Fed officials have two main missions in the role of governing the US central bank—maintaining price stability for everything that is bought and sold in the economy and ensuring “maximum employment.”

But this is no ordinary time. And Fed Chairman Jerome Powell may not be pleased with what he saw in a better-than-expected jobs report in November, experts say. Luck.

The US economy added 263,000 jobs last month and the unemployment rate remains near its pre-pandemic low of 3.7%. Bureau of Labor Statistics Friday report.

Wage growth also surprised economists, rising 0.6 percent on the month and 5.1 percent from a year ago.

While these are positive signs of the resilience of the US labor market, the Fed has focused on fighting inflation by raising interest rates. And November’s jobs report implies that Fed officials may have more work to do, as previous rate hikes have yet to achieve their goal of significantly softening the economy.

That could be bad news for investors, who had hoped the central bank would pause rate hikes, or even move on to cutting rates, amid signs of inflation. peaked in June.

Luck reached out to chief economists, investment executives and business leaders for their views on the latest jobs report and what it means for Powell’s fight against inflation and for the market. stock market.

Here’s what they said:

economists

Julia Pollak, chief economist at ZipRecruiter

“Wage growth was twice as high as expected and sent the stock market into a tailspin. The current pace of wage growth is incompatible with the Fed’s inflation target and increases the likelihood that the Fed will keep rates high for longer.”

Bill Adams, chief economist at America Bank

“Overall, the labor market remains tight and wage growth picked up in November. The Fed will view these data as affirming the need for additional rate hikes despite signs of the economy. are waning from business and consumer surveys.”

Gregory Daco and Lydia Boussour, EY-Parthenon Chief Economist and Senior Economist

“The labor market is still hot, but winter is coming… Wage growth has now decelerated from an average 418,000 jobs per month in the first three quarters of the year to 272,000 over the past three months.”

“Our conversations with executives point to a more severe trend in the labor market in the coming months as companies face weaker sales at home and abroad. , cost pressures continue and financial conditions are tighter. We continue to predict a US recession in early 2023.”

investment officer

Yung-Yu Ma, chief investment strategist at BMO Wealth Management

“The stock market looks set to grapple with three tough factors: stronger job growth, accelerated wage growth and a decline in the labor force participation rate.”

“Chairman Powell’s speech earlier this week was interpreted in a dovish lens, but that bias is likely to be reevaluated based on the jobs report. The FOMC has a mix of hawks and doves, and this report certainly provides more ammunition for the hawks.”

Rick Rieder, BlackRock’s chief investment officer for global fixed income and head of global attribution investing

“Today’s highly anticipated jobs report is another indicator that the labor market is still full of job opportunities, there is still a surplus of available workers (in fact, the job opening rate compared to the unemployed is 1.7).”

“Additionally, with the unemployment rate remaining flat and with no signs of a further decline in initial and continuing unemployment insurance claims, we believe the unemployment numbers will remain within a range.” present.”

“We think that much of the economic data released late, when combined with recent better inflation data, is providing a rich context for the Fed to adjust to rate hikes and ultimately pause. .”

“The Fed’s desire to slow the pace of rate hikes, but then keep rates high/limited for a while to let policy ‘marinate’ through the system makes us see this as a very cautious path. This week saw the market welcoming such a direction of travel and today’s jobs report doesn’t change that.”

Tim Holland, chief investment officer at Orion Advisor Solutions

“The better-than-expected jobs report is good news for American workers and bad news, at least in the short term, for risk assets as it supports the Reserve’s hawkish monetary policy. United States of America.”

“That said, it’s worth noting that the jobs report looks dated and claims for unemployment benefits are continuing to rise. It is very likely that the labor market will slow significantly in the first half of 2023, forcing the Fed to consider a much more dovish policy stance much sooner than many expect.”

Charlie Ripley, senior investment strategist for Allianz Investment Management

“Two steps forward, one step back, is the non-linear path the economic data take as the Fed moves towards its goal of containing inflation. Today’s labor market numbers are certainly a step back for the Fed with payrolls of 263K significantly above estimates.”

“Overall, the Fed has taken important steps to slow the economy, but today’s jobs report is a sign that they are not out of the woods yet and we expect policy tightening measures Additions will continue next year.”

Business leaders

Jay Hatfield, CEO of Infrastructure Capital Partners

“The November jobs report was very good…in the hospitality, education, healthcare and government sectors [sectors]. There are no signs of technology layoffs in the report with information technology adding 19,000 jobs.”

“Actually, the main driver of inflation is an oversupply of money… This year, the money supply fell 17%, causing mortgage rates to skyrocket and commodity prices to drop more than 30%.