No Pivot Yet from the Fed — But a Glimmer of Hope on Inflation
Author: Greg Valliere
October 5, 2022
YESTERDAY’S NEW YORK TIMES, citing mostly anecdotal evidence, reported that employers are no longer resorting to huge sign-up bonuses and dramatically higher wages. Workers seem to be coming back to the job market; perhaps generous benefits are running out.
SIGNS OF WORKERS RETURING come as major firms, especially in the tech industry, are freezing their hiring. Amazon said yesterday, in an email to recruiters, that the firm is halting hiring for all corporate roles and technology positions.
WILL THIS TREND SHOW UP in Friday’s September jobs report? Analysts expect a rise in nonfarm payrolls of about 250,000, but the payroll numbers have surprised to the upside in recent months. A jobs report that clearly shows a softening in hiring could give the bond bulls what they’re looking for.
THIS WON’T BE ENOUGH for the Federal Reserve’s hawks; they will keep their feet on the brakes into 2023 largely because they worry that wage pressure could become intractable. But if the labor market is already cooling, that could lead to less aggressive tightening by late this year. The markets can sense a pivot by early spring.
THE STOCK MARKET RALLY may have reflected wishful thinking about monetary policy by early 2023, but it also may have reflected growing optimism that Russia has lost the war in Ukraine.
THE WAR FUELED PESSIMISM ABOUT INFLATION persisting through the winter, especially in Western Europe, but suddenly there’s a case for a truce and negotiations beginning later this fall.
WITH RUSSIAN TROOPS FLEEING and reportedly turning on their commanding officers, this is starting to look like 1918, when Russian conscripts abandoned the trenches toward the end of World War I. Russian troops have no interest in fighting for Vladimir Putin, while Ukrainian troops are willing to die for their country.
AS THE MARKETS ROOT FOR a softening of wage inflation and as Moscow’s humiliation intensifies, there’s one other positive narrative — the Nov. 8 U.S. elections are likely to return Republicans to control of the House, which would virtually guarantee no new taxes in 2023-24.
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