“We do think its going to moderate over the next few quarters.”Īltogether, many investors see Friday’s jobs data keeping the Fed on track to hike its overnight rate by three-quarters of a percentage point next month. “Everything hinges on inflation at this point,” said Peter Essele, head of portfolio management for Commonwealth Financial Network. In the meantime, higher rates push down on prices for stocks, cryptocurrencies and other investments. The risk is that if the Fed goes too far, it could squeeze the economy into a recession. The Fed has already seen some effects, with higher mortgage rates hurting the housing industry in particular. The plan is to starve inflation of the purchases needed to keep prices rising even further. “We are not out of the woods yet, but should be getting closer as the impact of aggressive policy starts to take hold,” said Matt Peron, director of research at Janus Henderson Investors.īy hiking interest rates, the Fed is hoping to slow the economy and jobs market. That’s a continuation of a longstanding trend that could keep upward pressure on wages and inflation. Among people who aren’t working, fewer than usual are actively looking for jobs. That’s a slowdown from the hiring pace of 315,000 in July, but it’s still more than the 250,000 that economists expected.Īlso discouraging for investors was that the unemployment rate improved partly for the wrong reasons. “The market is increasingly coming to terms with, albeit gradually, that the Fed is highly unlikely to pivot in the near-term as some have been hoping for.”Įmployers added 263,000 jobs last month. “For for a lot of this a year, there really has been a degree of false optimism among many investors that the Fed would would tap the brakes and pivot sooner than they’ve been telling us they will for quite some time,” Bill Merz, head of capital market research at U.S. It’s a pattern that has been repeated several times this year. But Friday’s jobs report may have dashed such hopes for a “pivot” by the Fed. The major indexes managed to notch a gain for the week, thanks to a powerful but short-lived rally Monday and Tuesday after some investors squinted hard enough at some weaker-than-expected economic data to suggest the Fed may take it easier on rate hikes. Stocks have tumbled over 20% from records this year on worries about inflation, interest rates and the possibility of a recession. “The Fed thinks we need more people unemployed in order to make sure inflation comes down and stays down.” “The employment situation is still good and that might be a little frustrating to the Fed,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. That could clear the way for the Fed to continue hiking interest rates aggressively, something that risks causing a recession if done too severely. Wall Street is worried the Federal Reserve could see that as proof the economy has yet to slow enough to get inflation under control.
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