A slight autumn chill in the US labor market

The September jobs data report and the August JOLTS offered some signs of a loosening in labor market conditions. Job growth decelerated slightly, job openings declined, layoffs have ticked higher and wage growth appears to be cooling, if only marginally.

What you will learn:

• Signs of a better balance between the supply and demand for labor are welcome by the Fed, but no reason for a pivot from the Fed’s plans to continue to raise interest rates to bring down inflation. We expect another 125bps of rate hikes this year, with 75bps coming in November. A more marked slowdown in demand and inflation in the Q4 should allow the Fed to downshift to a 50bps increase in December and to pause in 2023.
• Financial stability concerns are a growing risk to the outlook for Fed policy. Volatility in the US Treasury market has risen sharply due to impaired liquidity amid shrinking at a time of heightened uncertainty. For, now the US appears better positioned than other countries to withstand heightened market volatility.