No one who participated in the FOMC’s latest macro forecasting exercise viewed risks to the US labor market as weighted to the upside.
Given the Committee’s spotty track record for predicting where the price of money (a price they themselves set) will end up in a year’s time, it’s tempting to call that a contrarian indicator. Or maybe that’s just the snarky, doomsaying bear in me surfacing on a slow news day.
I’m referring here to the SEP, of course. As the figure below shows, SEP participants have only been this sanguine about the labor market side of the dual mandate on a few other occasions.
The last time so few participants (seven) saw higher uncertainty around their own outlook for the jobless rate, the term “pandemic” was most commonly associated with the Spanish Flu.
By contrast, nearly all (15 of 18 and 17 out of 18) policymakers saw risks around core PCE weighted to the upside and higher uncertainty around their inflation projections.
That juxtaposition underscores just how unbalanced the Fed currently views the risks around the dual mandate. It’s all about inflation.
Similarly, the September vintage of BofA’s Global Fund Manager poll showed the share who see a “hard landing” for the global economy falling back to a record low 2%.
“The majority of investors still expect ‘no landing,'” the bank’s Michael Hartnett remarked. That’s just barely off last month’s record high.
Coming quickly back to the Fed, the Committee’s focused squarely (myopically?) on the war, crude, refined products and the read-across of the conflict for prices. “With the front month WTI contract trending near $100/bbl, the focus will remain on the inflation side of the dual mandate,” BMO’s Ian Lyngen and Vail Hartman said, adding that so far in 2026, neither the employment nor the consumption data has evidenced “any particular signs of strain.”
Suffice to say policymakers and professional capital allocators would be wrong-footed (badly) in the presence of a left-tail macro shock that results in widespread job losses.
