Jerome Is Thinking About Jobs
“Progress” is his word on inflation.
If the job is to get inflation back toward its 2 percent target without breaking the economy, the Federal Reserve appears to be doing it, according to a steady stream of incoming data.Even Fed Chair Jerome Powell said he was pleased with the central bank’s progress – “significant progress,” “real progress,” and “quite a bit of progress” is how he framed it from the stage at the ECB Forum in Portugal on Tuesday.
But Powell is not yet confident enough that inflation is moving sustainably down. “We want to understand that the levels that we’re seeing are a true reading on what is actually happening with underlying inflation,” he said.
We’ll get a read on what Federal Open Market Committee members were thinking about the economy, inflation, and employment in June upon release of the minutes from their most recent meeting today at 2:00 p.m. ET.
The New York Stock Exchange and the Nasdaq will be closed by then – they’ll shut it down at 1:00 p.m. And the bond market will close at 2:00 p.m. Those minutes won’t reflect the most recent incoming data anyway.
We’ll have to wait until Friday for any overreaction, as markets will be closed in the US on Thursday in observance of Independence Day.
Powell shared his current thinking yesterday in Portugal: “You can see the labor market is cooling off, appropriately so, and we’re watching it very carefully.”
He didn’t set a timeline for a change in policy – “I’m not going to be landing on any specific dates here today” – but reiterated that a sudden deterioration in employment growth could be a catalyst for the central bank to cut the federal funds target rate.
BLS data show job openings bounced up to 8.1 million in May from 7.9 million in April. Openings have fallen from a record high of 12 million in March 2022 but remain above a long-term pre-pandemic average just below 7 million.
The ratio of job openings per unemployed worker was flat at 1.2, down from the 2022 peak of 2.0 percent and back in line with the pre-pandemic trend. The quits rate was steady at 2.2 percent. The layoff rate was steady at 1.0 percent.
The good news here is nothing is moving too fast in either direction.
We will see what’s happening with the ever-noisy weekly jobless claims set at 8:30 a.m., but it’s been slow-stepping up and down lately and is unlikely to provide definitive answers this morning.
So it looks like the Fed has something like optionality when it comes to holding for longer or cutting.
That’s subject to the pressures of the political calendar, but surely we can enjoy our ideas about independence on this day, of any day…
