Here’s what the pundits are saying about Powell’s next step in the big fight against inflation

When a strong jobs report hits the Federal Reserve chairman’s desk, it’s usually cause for celebration.

After all, Fed officials have two main duties in their role of managing the US central bank: to maintain price stability for everything bought and sold in the economy, and to ensure “maximum employment.”

But these are not normal times. And Fed Chairman Jerome Powell probably wasn’t happy with what he saw in November’s better-than-expected jobs report, experts said Fortune.

The U.S. economy added 263,000 jobs last month and the unemployment rate remained near its pre-pandemic lows at 3.7%, the Bureau of Labor Statistics reported Friday.

Wage growth also surprised economists, rising 0.6% in the month and 5.1% from a year ago.

While these are positive signs of the resilience of the US labor market, the Fed has focused on fighting inflation by raising interest rates. And November’s jobs report implies that Fed officials may have more work to do, as its previous rate hikes have yet to achieve their goal of substantially cooling the economy.

This could be bad news for investors who had been hoping the central bank would halt its interest rate hikes, or even lean towards rate cuts, amid signs that inflation peaked in June.

Fortune reached out to top economists, investment managers and business leaders to get their thoughts on the latest jobs report and what it means for Powell’s inflation fight and for the stock market.

Here’s what they had to say:

Economists

Julia Pollak, chief economist at ZipRecruiter

  • “Wage growth has been double than expected and has sent the stock market into a tailspin. The current pace of wage growth is inconsistent with the Fed’s inflation target and has increased the likelihood that the Fed will keep interest rates elevated for longer.”

Bill Adams, chief economist at Comerica Bank

  • “Overall, the labor market remains tight and wage growth picked up in November. The Fed will view this data as an affirmation of the need for further interest rate hikes despite signs of a weakening economy from business and consumer surveys.”

Gregory Daco and Lydia Boussour, chief economist and senior economist at EY-Parthenon

  • “The job market is still warm, but winter is coming… Wage growth has now slowed from an average of 418,000 jobs per month in the first three quarters of the year to 272,000 in the last three months.”

  • “Our conversations with executives point to a more significant deterioration in labor market trends in the coming months as companies face weaker sales domestically and overseas, continued cost pressures and tighter financing conditions. We continue to expect a US recession in early 2023.”

Investment officers

Yung-Yu Ma, chief investment strategist at BMO Wealth Management

  • “The stock market looks set to contend with the triple blow of stronger job growth, accelerating wage growth and reduced labor force participation.”

  • “Chairman Powell’s speech earlier in the week was interpreted with a dovish lens, but that turn is likely to be reevaluated based on the jobs report. The FOMC has a mix of hawks and dovish, and this report certainly provides more ammunition for the hawks.”

Rick Rieder, chief investment officer of BlackRock’s global fixed income and head of global allocation investments

  • “Today’s long-awaited jobs report was another indicator of a labor market still full of vacancies, which remain well above the available workforce (indeed, the vacancies-to-unemployed ratio is at 1 ,7).”

  • “Furthermore, the unemployment rate was flat and in the absence of signs of a major deterioration in initial and ongoing claims for unemployment insurance, we believe the unemployment figure will remain in the range for now.”

  • “We think much of the recently released economic data, when coupled with the recently improved inflation data, is providing ample context for the Fed to moderate rate hikes and eventually come to a pause.”

  • “The Fed’s desire to slow its rate hikes, but then keep them high/tight for a while to let policy ‘marine’ through the system seems to us a very prudent path. Markets have been applauding such a direction of travel this week and today’s jobs report does little to change that.”

Tim Holland, chief investment officer of Orion Advisor Solutions

  • “The better-than-expected jobs report is good news for the American worker and bad news, at least in the short term, for risky assets as it supports aggressive monetary policy from the US Federal Reserve.”

  • “That said, it is worth noting that the employment report is retrospective and continued jobless claims have increased. There’s a good chance the job market will slow significantly in the first half of 2023, forcing the Fed to consider a much more supportive policy stance sooner than many expect.

Charlie Ripley, senior investment strategist for Allianz Investment Management

  • “Two steps forward, one step back, is the nonlinear path economic data looks like as the Fed marches toward its goal of crushing inflation. Today’s labor market figures were certainly a step backwards for the Fed with 263,000 payrolls significantly exceeding estimates.

  • “Overall, the Fed has taken significant steps to slow the economy, but today’s jobs report is a sign they’re not out of the woods yet, and we expect further policy tightening to continue into the coming year.”

Business leaders

Jay Hatfield, CEO of Infrastructure Capital Partners

  • “November’s jobs report was strong…in the hospitality, education, healthcare and government sectors [sectors]. There was no sign of tech layoffs in the relationship with information technology adding 19,000 jobs.

  • “The key driver of the inflation, really, has been the excess money supply… This year the money supply has fallen by 17%, causing mortgage rates to soar and commodity prices to fall prime by more than 30%”.

Matthew Markiewicz, founder of AXS Investments

This story was originally published on Fortune.com

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