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Wild Jobs Miss Comes With Super-Hot Wages, 3.9% Unemployment
The US economy added just 199,000 jobs last month, the government's hotly anticipated December payro
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If the Fed sticks to Bullard’s tightening schedule in the face of the slowdown in hiring, it makes it clear that they have added a new policy mandate: suppress wage gains.
Which then clarifies which inflation the Fed is most worried about. Not dollar inflation or securities inflation or goods inflation but labor inflation.
In fairness, perhaps it is also a “back door” effort to cool asset and housing prices?
The Fed has always keep a publicly hands-off attitude towards asset bubbles. They clearly regard rising housing prices as a third rail they cannot explicitly touch. Even to the point of putting the greater economy at risk through blanket rate increases rather than simply tightening mortgage availability rules. Like every central bank in the developed world does.
I guess they feel it is safer to be seen as suppressing wages ….
The Fed putting the brakes on is an indication that fiscal and monetary policy worked well in 2020-21 post pandemic. It was better they went overboard- and further fiscal stimulus aimed at the bottom 70% would be better still. I have arguments with my UST bond hedger friend about the balance sheet. I think the flow matters more, he thinks the stock of UST bonds at the Fed matters and they should reduce UST bond holdings. I think they would be far better off getting out of the balance sheet games and just raise rates as needed. Rates are a lot easier to adjust. They can always reinvest MBS into UST bonds of 7 years or less.