Cooling Job Market Boosts Case for End of Fed Hikes

Slowing U.S. job growth and cooling wage pressures may give Federal Reserve policymakers renewed confidence that the U.S. economy is adjusting from the shock of the coronavirus pandemic, allowing inflation to continue to ease without the need for further interest rate increases.

U.S. central bankers themselves are not even thinking about rate cuts, Fed Chair Jerome Powell said this week after the Fed kept its benchmark overnight interest rate steady in the 5.25%-5.50% range. Policymakers are waiting for more confirmation the economy is coming into better balance after pandemic disruptions to the supply of goods and labor helped push inflation to 40-year highs last year.

The drop in longer-term borrowing costs - the yield on the benchmark 10-year Treasury note fell below 4.5% after the release of the jobs report - poses a problem that, if it continues, may actually bolster the case for another Fed rate hike to ensure overall borrowing conditions don't loosen. The average monthly payrolls gain over the last three months has slowed to 204,000, the latest jobs report showed, after peaking in the summer of 2021 at 708,000. That's nearing the average monthly job gain of 183,000 during the 10 years leading up to the pandemic.

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