Labor Market Stabilization & Fed Policy (with Tom Keene, Paul Sweeney)

Claudia Sahm views the jobs report as solid, showing labor market stabilization with modest payroll additions and slowing wage growth, which reduces immediate inflationary pressure for the Fed. She notes wages are not keeping up with inflation, limiting consumer purchasing power but not creating a wage-price spiral.

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New Century Advisors 4.5
Financial Advisory
Claudia Sahm 8.5

Labor Market Stabilization & Fed Policy (with Tom Keene, Paul Sweeney)

ndx

Sahm focuses on labor market stabilization without inflationary pressure, suggesting no major catalyst for tech moves; the market is in a wait-and-see mode.

yields

Sahm notes the report is solid with moderate wage growth, reducing immediate rate cut expectations, which supports slightly higher yields in the near term.

Tom Keene

Non-farm payrolls are tough to call, but with 93,000 plus two-month revision and underemployment dropping from 8.2% to 8.1%, how does a chairman respond when cutting curtains for the new office?
Claudia Sahm

The report is solid: good news on adding jobs, wage growth still moderate and slowing, so the Fed is not anti-jobs but anti-inflation. These are modest payroll numbers, much better than last year, with low unemployment and slowing wage growth, so no inflationary pressure here.
Tom Keene

Three-month moving average of non-farm payrolls is 188,000. Do you assume this will be revised down in 6 or 12 months?
Claudia Sahm

No, we shouldn't assume down revision. Research from Cleveland Fed says these aren't anomalies; surveys aren't always prone to down revision. Administrative data suggests we might get an upward revision for last year. This puts an exclamation point on labor market stabilization relative to last year.
Paul Sweeney

Wages are at 3.4% annualized growth, but next week's CPI consensus is 4.2%. Wages are not keeping up with inflation. What's the thought there?
Claudia Sahm

Wages not keeping up with inflation limits purchasing power. This data doesn't show second-round effects of workers bargaining up wages to cover prices, which would create another round of inflation. The flip side is hardship on workers seeing paychecks eaten up, limiting businesses' ability to pass on costs.

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