New York CNN —
The US job market remains hot. This raises questions about how quickly inflation will continue to cool.
The economy added a staggering 254,000 jobs in September, according to data released Friday by the U.S. Bureau of Labor Statistics. This was higher than the 140,000 jobs expected by economists compiled by FactSet, and was a significant increase from August’s upwardly revised 159,000. The unemployment rate fell slightly from 4.2% to 4.1%.
This comes after the Fed cut interest rates by a whopping 0.5 percentage point last month, signaling that it was focused on keeping the job market stable rather than curbing inflation. The positive labor data led traders to increase their bets on a quarter-point cut in November rather than a deeper half-point cut, according to the CME FedWatch tool.
Investors say the better-than-expected jobs report suggests a soft landing – a scenario in which inflation is subdued without a recession – is within reach. But some warn that a continued strong labor market could make continued cooling of inflation more difficult. That’s because low unemployment and a hot job market highlight the strength of U.S. consumers, whose spending is driving up the cost of goods and services.
“With the Fed now easing, recession risks have been eliminated. There are policy risks on both sides of the economy right now, so markets need to keep a close eye on inflation,” said Chief of Principal Asset Management.・Global Strategist Seema Shah said.
Investors will get their next perspective on inflation through two important reports released this week. The U.S. Bureau of Labor Statistics will release September’s consumer price index on Thursday, followed by the wholesale inflation rate the following day.
Inflation statistics have been encouraging in recent months. The Federal Reserve’s favorite inflation measure, the Personal Consumption Expenditures Price Index, rose 2.2% in the 12 months through August, down from an annual rate of 2.5% in July. Consumer inflation slowed in August to its lowest annual pace since February 2021, continuing a subdued trend in recent months.
Gina Bolvin, president of Bolvin Wealth Management Group, wrote in a note Friday that the Fed “may be concerned about inflation rearing its ugly head” after strong September labor data. . “We may go back to them with a focus on 50/50 dual duty.”
Stocks rose modestly to start the fourth quarter after setting a record for the first nine months of the year since 1977. The market was volatile until early October, as the escalating conflict between Israel and Iran caused stock prices to fluctuate and oil prices to rise. All three major indexes posted weekly gains on the back of strong employment data.
Oil prices are currently well below last year’s highs and the $100 a barrel they hit when Russia invaded Ukraine in 2022, but oil prices could rise if conflicts in the Middle East escalate further. some analysts point out. Rising energy costs also risk pushing up inflation.
Still, investors breathed a sigh of relief as the International Longshoremen’s Association, a union representing 50,000 members covered by the United States Maritime Alliance contract, resumed operations on Friday. Both resolutions allayed concerns that the strike, which ultimately lasted three days, could disrupt supply chains and cause shortages of consumer goods and supplies.
