PIMCO: U.S. Employment Report Reaction

PIMCO: U.S. Employment Report Reaction

8 augustus 2022

Verenigde Staten Arbeidsmarkt
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By Tiffany Wilding, North American Economist, and Allison Boxer, Economist at PIMCO

Another very strong payroll report is going to put the Fed firmly back on their hawkish path. Payrolls were 2x stronger than our expectations and household employment also rose.

The strong labor market report confirms the US was not in recession in July and suggests the Fed can and will do more to tame inflation. Wage inflation was again firm: a sign that core price inflation will remain sticky despite some relief in food and energy prices over the coming months. A 75 basis point rate hike in September is now likely to be the base case for Fed officials, as they pull forward additional hikes in 2022 yet again.

Still, looking at a broader range of high frequency labor market indicators suggest labor markets will lose momentum at some point, but forecasting with precision the timing of that slowdown is increasingly difficult. This plus the fact that the Fed is likely to do more to tighten financial conditions in the very near-term, doesn’t change our 12-month outlook that recession is more likely than not.

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