Economics/Class Relations

Why the Fed wants corporate America to have a hiring freeze


The chorus of those wanting a weaker labor market is getting louder and louder.

After the recent job numbers were released last week, Bank of America analysts said in a note they are essentially “rooting against the home team” and hope the numbers stop being so strong. As higher wages contribute to inflation, the Federal Reserve appears to agree.

“Chair Powell keeps mentioning the relationship between the high level of job openings and wage/price inflation,” Nicholas Colas, co-founder of DataTrek, wrote in a newsletter on Tuesday. “He’s not talking to investors. He’s talking to corporate America, and his goal is to have companies essentially institute a hiring freeze and end the cycle of paying up for new hires.”

Wednesday’s economic release of consumer prices (CPI) showed inflation rose more slowly in April (8.3%) compared to March (8.5%). While the report was expected to have shown a March peak, there wasn’t much good news.

“[Substantial] declines in the annual rate of inflation are unlikely to materialize until there are significant improvements in geopolitical tensions (that would get energy prices lower), supply chain strains and labour market shortages,” wrote ING’s James Knightley in a note after the release. “Unfortunately, there is little sign of any of this happening anytime soon.”

TD Securities analysts agreed, noting the “report should be of concern for the Fed given price gains in the core segment appear to be spreading.”


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