"Since late 2022, I have consistently argued that the Fed shifted its approach to maintaining a more restrictive policy throughout this cycle. I have emphasized that, regardless of fluctuations in labor data, the Fed will maintain its restrictive stance until jobless claims rise significantly. Specifically, a break in jobless claims would be indicated by the four-week moving average approaching 323,000."
"I maintain that the Federal Reserve's primary objective has been to suppress wage growth. With wage growth now at cycle lows, the institution is nearing its policy targets. Wage growth is trending toward 3%, while productivity, they believe, is really running at 1%. These conditions are conducive to achieving their 2% inflation target. With this context in mind, let's examine the latest report."
"From BLS: Total nonfarm payroll employment changed little in November (+64,000) and has shown little net change since April, the U.S. Bureau of Labor Statistics reported today. In November, the unemployment rate, at 4.6 percent, was little changed from September's 4.5 percent. Employment rose in health care and construction in November, while the federal government continued to lose jobs. October's employment figures were notably volatile, so I interpret the reported decline of 105,000 jobs with caution."
Job growth has slowed to an average of 17,000 per month over the past six months, with annual average payroll gains near 55,000 per month. The unemployment rate is 4.6 percent and nonfarm payrolls rose modestly in November (+64,000). The Federal Reserve is maintaining a restrictive policy stance slightly above neutral and is likely to keep that stance until jobless claims rise materially, using a four-week moving average near 323,000 as a potential trigger. Wage growth is at cycle lows and trending toward 3 percent while productivity is estimated near 1 percent, creating conditions favorable for a 2 percent inflation outcome.
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