🍲 Jobs still too hot

Plus: Dispatch from Buffalo | Friday, October 07, 2022

Open in app View in browser   Presented By Walmart   Axios Macro By Neil Irwin and Courtenay Brown · Oct 07, 2022 In yesterday's edition, we laid out what a dream jobs report — at least in the eyes of the Fed — might look like. But this morning's payrolls report didn't quite deliver that dream. We dig into that below. Plus, Courtenay in Buffalo, New York, breaks down New York Fed president John Williams' thoughts on some key issues. 🗓 Programming note: We won't be sending a newsletter on Monday's federal holiday, but expect us back in your inbox on Tuesday. Today's edition, edited by Javier E. David and Katie Lewis, is 592 words, a 2-minute read.     1 big thing: The too-hot-for-comfort job market Illustration: Brendan Lynch/Axios   Most of the time, if a jobs report like the one that came out this morning were to be released, there would be only good things to say about it. But these are not normal times. We're at a moment in which small changes in the data could have an outsized effect on the Federal Reserve's policy fulcrum, and hence what the economy looks like in 2023 and beyond. Why it matters: The remarkable resilience in the U.S. labor market is great for workers, but will make the Fed inclined to keep pushing interest rates higher, with all the problems that entails. By the numbers: The U.S. labor market is exceptionally strong. The unemployment rate fell to 3.5% from 3.7%; the last time it was lower was May of 1969. Pretty much every American who wants a job right now can get one. Between the lines: That's good news for workers. But in the halls of the nation's central bank, it will be interpreted as a sign that their campaign to tighten the screws of monetary policy — for all its effects in making global markets go haywire— is not constraining surging demand. That, in turn, fuels inflation. The new numbers are consistent with the Fed raising interest rates by a supersized 0.75 percentage point in early November for the fourth straight meeting. Just this week, multiple Fed officials affirmed that recent turbulence in global markets is not shaking their resolve to keep up rate increases. Yes, but: The longer the Fed stays on this course of very rapid rate hikes, the more likely it will overshoot and cause more U.S. and global economic pain than is necessary to bring inflation down. The bottom line: Good news now raises the risk of things going awry next year. Go deeper.     A message from Walmart Walmart's new investments bring deeper savings for holiday shopping     More than 80% of customers who plan to shop at Walmart this holiday season are doing so because of Walmart's low prices. Walmart is making significant price investments in key categories to ensure that it can deliver amazing value for its customers during a time when they need it most. Learn more.     2. Dispatch from Buffalo: Williams on economy, debt Photo: SeongJoon Cho/Bloomberg via Getty Images   Inflation remains very high, and the Fed is far from its goals — a narrative that remains unchanged by this morning's jobs report. This was the message the New York Fed's Williams gave during a question and answer session before students and professors at Buffalo State University, a final stop on his two-day tour of the region. What they're saying: "When the economy is weak ... the focus is getting America back to work. Right now, the focus is getting inflation back to 2% and keep the economy growing as best as we can," Williams said. Williams said he expects inflation to come down "significantly" next year. Interest rates likely need to rise to 4.5%, and the pace at which the Fed gets there will rely on incoming data, he added. One student asked how Williams considers developments in other countries. There has been a steady drumbeat of gloomy warnings about the world economy as the Fed swiftly raises interest rates. Williams pointed to meetings he conducts every two months with other countries' central bank leaders: There is no coordination, but there is plenty of transparency. "The more information we provide, the more we tell them about where our forecasts are and such things, the better other countries can prepare," Williams said, who added the Fed has a domestic mandate. The last question dealt with a hot issue: student debt forgiveness. What impact would President Joe Biden's forgiveness policy have on the economy? "Consumers will have more money in their pockets and they will spend somewhat more, but it's not a huge game changer in terms of the overall picture of our economy in the short run," Williams said. "It's a thing that on the margin might mean a little bit faster growth."     A message from Walmart Bringing convenience, value and experience this holiday season     Walmart just announced new price investments for even deeper savings, three new and expanded returns options, a broader assortment with new top gifts, a new community giving platform, and an enhanced omni-channel shopping experience to deliver for its customers all season long. Learn more.   Are you a fan of this email format? It's called Smart Brevity®. Over 300 orgs use it — in a tool called Axios HQ — to drive productivity with clearer workplace communications.   Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here. Sponsorship has no influence on editorial content. Axios, 3100 Clarendon B‌lvd, Arlington VA 22201   You received this email because you signed up for newsletters from Axios. 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