Markets will be in for a 'rude awakening’ following jobs report, economist warns
Markets will be in for a rude awakening: Stephanie Pomboy
MacroMavens founder Stephanie Pomboy and former Reagan economic adviser Steve Moore weigh in on the July employment report shortly after its release on ‘Mornings with Maria.’
MacroMavens founder Stephanie Pomboy warned Friday following the release of the July employment report that "markets are going to be in for a rude awakening."
Speaking on "Mornings with Maria," the economist noted that "employment is the most lagging of lagging indicators" and that is "troubling" for what it implies for the Federal Reserve.
The economist argued that the Fed "really put most of their eggs in this employment basket, and they’re looking at a lagging indicator to tell them when it’s time that they have tightened enough, which suggests that they are going to overdo it on the rate hikes."
Late last month, the Federal Reserve raised its benchmark interest rate by 75 basis points for the second straight month as it tries to bring persistent inflation under control, a move that threatens to slow U.S. economic growth and exacerbate financial pressure on Americans.
US ECONOMY ADDS 528,000 JOBS IN JULY, BLOWING PAST EXPECTATIONS
July jobs report beats expectations as 528K jobs added to US economy
FOX Business’ Edward Lawrence breaks down the July jobs report, which indicates 528,000 jobs were added to the U.S. economy.
The move puts the key benchmark federal funds rate at a range of 2.25% to 2.50%, the highest since the pandemic began two years ago. It marks the fourth consecutive rate increase this year.
Policymakers signaled in their post-meeting statement that additional increases are likely in the coming months as they remain "strongly committed to returning inflation to its 2% objective." Chairman Jerome Powell said during his post-meeting press conference that another 75-basis point hike could be appropriate in the future, but that it ultimately hinges on upcoming economic data.
Inflation accelerated more than expected in June, with the Labor Department reporting last month that the consumer price index surged 9.1% last month, the fastest pace since 1981.
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But the efforts to combat inflation carry a potential risk of recession, with a growing number of economists and Wall Street firms forecasting an economic downturn this year or next. Hiking interest rates tends to create higher rates on consumer and business loans, which slows the economy by forcing employers to cut back on spending.
There has been conflicting signs about the economy's health given the number of Americans filing for unemployment benefits has gradually increased, companies have announced layoffs or hiring freezes and the housing market is softening. At the same time, unemployment remains near a historic low and consumers are still spending heavily despite soaring inflation.
Fed Chair Jerome Powell holds a press conference following the Federal Reserve’s Open Market Committee meeting
Fed Chair Jerome Powell holds a press conference following the Federal Reserve’s Open Market Committee meeting.
Pomboy noted on Friday that "every other leading indicator of employment has rolled over hard," including small business polls and all the regional Fed surveys.
"Basically every single employment indicator with the exception of payroll has rolled over so I think it’s just a question of time before this one rolls over also," she argued.
"Meanwhile, the Fed is navigating through the rear-view mirror, which is dangerous at any speed, but especially when you’re pushing the fastest rate hikes in the history of our economy so I do think that the markets are going to be in for a rude awakening here."
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Markets sank Friday morning as the data dashed hopes of a more dovish Fed in coming months.
U.S. job growth unexpectedly accelerated in July, defying fears of a slowdown in hiring even as the labor market confronts the twin threats of scorching-hot inflation and rising interest rates.
Employers added 528,000 jobs in July, the Labor Department said in its monthly payroll report, blowing past the 250,000 jobs forecast by Refinitiv economists. The unemployment rate, meanwhile, edged down to 3.5%, the lowest level since the COVID-19 pandemic began more than two years ago.