Americans will start losing their jobs soon – and that will likely stop the Federal Reserve from achieving itsMost banks expect unemployment to spike above 4% over the next 12 months asthat while those job losses will suppress wage growth and help inflation fall to the Fed's target level of 2%, they'll also scupper its hopes for a so-called"soft landing" – when soaring prices cool but there's no recession in the US.
"It's going to take some labor market weakness to go that last yard, as many call it, from 3% trend inflation down to 2%," the asset manager's chief global economist and head of investment strategy said. "Almost everyone has a rise in the unemployment rate of at least 30 or 40 basis points, so going above 4% over the next year," Davis added."Well, historically, that has been 100% associated with a recession – now, not necessarily deep in magnitude, but a recession."the Fed itself said it's no longer expecting there'll be a recession in the US this year"Semantically, they're on record saying no recession," Davis told Bloomberg.
The central bank has raised interest rates from near-zero to over 5% since March 2022 in a bid to tame soaring prices but pledged to take a data-dependent approach to tightening last week.