|“But wait! Jobs are strong, and unemployment has remained flat.”
You’re not wrong if that’s your initial reaction reading all this. Friday’s job report was indeed strong. The US added 336,000 jobs last month, nearly double what was forecast, while the unemployment rate held at 3.8%.
The US consumer, meanwhile, has been resilient, spending in the face of rising inflation. However, the cracks are starting to show in that foundation.
But therein lies the problem. If the economy continues to excel despite inflation, the Fed won’t feel comfortable lowering rates and losing the progress made.
Hence the will-it-won’t-it recession talk that has dominated market conversations for over a year.
If all this discussion of a recession is bumming you out, understand it’s not a foregone conclusion. While executing a soft landing has gotten considerably more complicated, it’s not impossible.
It’ll be a wait-and-see as all eyes are on the Fed’s rate decision on November 1. CME’s FedWatch Tool, which tracks the likelihood of the Fed’s decision according to interest-rate traders, favors another pause on hikes.
But if the past 15 months have been any indication, the only certainty seems to be more uncertainty.