Today’s #JobsReport revealed an #economy that is producing #jobs at a slower pace than it has over the prior several months.
That said, a historic number of jobs have been created in this recovery since the fall of 2020, so a slowing in the pace of #growth isn’t unexpected.
Even with today’s somewhat slower rate of #hiring at 315,000 jobs for the month of August, the 3-month and 6-month average of #payroll gains has been 378,000 and 381,000 jobs, respectively, which is clearly indicative of slowing today from a point of strength.
Hence, while some doors for hiring are closing, with a modestly slowing #PayrollGrowth number, it clearly is at a fast enough pace to provide the @federalreserve the open-door to pursue its top priority: lower rates of current #inflation.
The #Fed has described a willingness, and in fact a desire to reduce demand in the system, with somewhat higher levels of #unemployment as an offshoot of the need to address high and persistent levels of #inflation head-on.
As a result, the door is still wide open for the #Fed to keep moving, and we also think this keeps the potential for a 75-bps hike at the September meeting still on the table.
In fact, this is our best guess for the September meeting’s #policy action, before the Fed can gradually reduce the size and pace of these #RateHikes.
Still, there are structural reasons that make bringing down #inflation difficult. These include the devastating and persistent war in the Ukraine, which has driven #energy and food prices to elevated levels, as a result of the risk of under-supply.
Further, #deglobalization stemming partly from this war, as well as tensions between China and the U.S., has contributed to price gains, as does lower #housing inventories in the U.S., which keep all-important #shelter costs high.
And as we witnessed today; still high levels of #wages (5.20% higher over the past year) contribute to higher net disposable #income and #spending power, but also to the gain in generalized prices.
In summary, #employment growth appears to be moderating, albeit very slowly today, but the #Fed clearly won’t fight this, and in fact will be more than willing to tolerate conditions for slowing broad #economic demand.
And despite being late to move last year, this year we think the #Fed has been right on point in bringing the policy rate quickly to neutral, and has the door wide open to get another 75 bps of hikes done to move into more #restrictive territory in September.
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