Signs that labor demand is softening based on a decline in job openings"The Fed has repeatedly referred to the need to soften the labor market, meaning drive up unemployment rates, to contain age pressures seen driving services inflation. It certainly seems the momentum of the labor market shows that wage pressures should be quickly diminishing," Fundstrat's Tom Lee said.
Lee highlighted that the phrase"job cuts" has been mentioned on 154 company earnings calls, while"labor shortage" has plunged to just 31 from a peak of 138 at the end of 2021. "And this comes at a time when over 200 references have been made to 'credit tightening' so this doesn't point to a job market that will strengthen," Lee said.
"The constellation of data is already pointing to a softening of labor market demand, jobs itself and eventually wages. And as such, the sticky part of inflation, core services ex-housing, will see a tailwind diminish," Lee said. Andthat should give the Fed ample breathing room to pause further interest rate hikes.
Lee thinks the current environment surrounding what the Fed does at its FOMC meeting later today could be bullish for risk assets because stocks have gone nowhere over the past year, while deleveraging among investors has occurred.