Hot US Jobs Print Hides Reality Fed Can't Afford To Ignore
The Federal Reserve is likely to make a call it will come to regret, warns the CEO of deVere Group, one of the world's largest independent financial advisory organisations, as fresh employment data lands less than two weeks before policymakers meet to decide on interest rates.
The comments from Nigel Green come as the Bureau of Labor Statistics reported that US employers added 162,000 jobs in August, comfortably beating forecasts of roughly 53,000 and pushing unemployment to hold at 4.1%.
June and July payrolls were also revised up by a combined 55,000, turning what had briefly looked like a two-month stall into a rebound. Wage growth, however, cooled to 3.1% on the year, its slowest pace in five years and still running below the latest annual inflation reading of 3.4%.
The gains were heavily concentrated. Leisure and hospitality added 62,000 positions after two straight months of losses, local government education reversed a sharp July decline, and healthcare and social assistance kept adding jobs as it has for months.
AdvertisementMeanwhile, the information sector shed workers, average hours ticked only marginally higher, and the share of people stuck in part-time work for economic reasons, while lower than earlier in the year, remains elevated by historical standards.
Markets widely expect the Federal Reserve to leave its benchmark rate unchanged at 3.50% to 3.75% when the committee meets on September 16, the fourth straight hold since December.
Nigel Green believes that caution, while explainable given still-elevated inflation, is now the wrong call.
Nigel Green argues that policymakers are at risk of anchoring too heavily on a single stronger-than-expected month rather than the trend beneath it.
He warns that the cost of the Fed misjudging this moment won't only be felt in financial markets alone.
Nigel Green concludes that the coming weeks will test whether the Federal Reserve is willing to act on what sits beneath one strong month, rather than the print itself.
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