Why the Fed should focus more on the labor market than inflation

Investors are turning their attention to a slew of economic data in the weeks ahead after the Federal Reserve initiated its first interest rate cut in four years. Wolfe Research chief economist Stephanie Roth joins Morning Brief to discuss the state of the economy and the Fed's path forward as it eyes a soft landing.

Thus, she notes the upcoming payrolls print will be especially important as the Fed weighs the amount of its next cut."Our base case is that we're going to see payrolls come in a little bit better than the market is fearing," she explains, noting that the print would come in between 120,000 and 130,000. If the data comes in lower than that threshold, she believes that the Fed could initiate another 50 basis-point cut. Similarly, if the unemployment rate were to rise to 4.

You know, if it is so interesting because as we're seeing right now, Bowman um coming out and saying that core inflation remains quote uncomfortably above that 2% target, seeing greater risk to inflation than the labor market.He said he's worried about inflation perhaps missing to the downside.

But if you look at the more recent trend that you've seen a deceleration in employment growth, then you should expect wage growth to follow as well.So, you know, Boeing strikers potentially getting AAA boost to their wage inflation or port strikes, potentially disrupting activity.And at this point, the risk of having a, a labor market that we more materially is more significant for the economy than having inflation run a bit bit high.

So that the threshold that you were referring to, I would say somewhere but 100 and 20 100 and 30,000 on payrolls. But hands down the payrolls print is gonna be arguably the most important thing, determining the next couple of, couple of uh moves from the fed at this juncture.

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US Stocks Waver as Investors Weigh Inflation, Labor Data Ahead of Fed MeetingThe S&P 500 and Nasdaq Composite experienced mixed performance on Thursday as investors analyzed recent inflation and labor market data, which are influencing expectations for the Federal Reserve's next interest rate decision. The Dow Jones Industrial Average declined.
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