The Federal Reserve can probably end its inflation fight now that labor market is cooling after it gained a historic 26 million jobs in roughly the past three years, according to BlackRock’s Rick Rieder.
“In fact, 26 million jobs is like adding an economy the size of Australia or Taiwan (including every man, woman, and child), said Rieder, BlackRock’s chief investment officer of global fixed income, in emailed commentary following Friday’s monthly jobs report for August.
The report showed the U.S. adding 187,000 new jobs, slightly more than forecasts, but also pointing to an uptick in the low unemployment rate to 3.8% from 3.5%.
“Remarkably, 22 million people were hired between May 2020 and April 2022, and 11 million were added to the workforce from June 2021 to May 2023, as the economy has opened up massive amounts of roles for fulfillment,” said Rieder.
He expects wage pressures to ease and thinks the “economy may now have fulfilled many of its needs,” which should make the Fed feel more confident in “the permanence of lower levels of inflation,” so that it can slow or stop its interest rate rises by year-end.
Hiring in the U.S. has slowed, except for in education and healthcare services, when looking at private payrolls based on a three-month moving average.
The Fed has already raised interest rates to a 22-year high in July to a 5.25%-5.5% range, with traders in fed-funds futures on Friday pricing in only about a 7% chance of another Fed rate hike in September and favoring no hike again at the central bank’s November policy meeting.
Rieder at BlackRock, one of the world’s largest asset manager with $2.7 trillion in assets under management, thinks a Fed pause or end of rate hikes could calm markets, even if the Fed, as BlackRock expects, keeps rates high for a time.
U.S. stocks were choppy Friday ahead of the long holiday weekend for Labor Day, with the Dow Jones Industrial Average DJIA up 0.1%, the S&P 500 index SPX roughly flat and the Nasdaq Composite Index COMP was 0.2% lower, according to FactSet.
The 10-year Treasury yield BX:TMUBMUSD10Y was around 4.18%, after hitting its highest since 2007 in late August, adding to volatility that has wiped out earlier yearly gains in the roughly $25 trillion Treasury market.