The Maverick of Wall Street: The Fed Is Getting Very Very Confused

The Federal Reserve appears to be making some bad decisions right now. As a result of its dazed and confused behavior, markets will likely be chaotic for months to come. That has a huge impact for everyday Americans.

Based on the latest jobs numbers, things don’t look so bad. The economy added 372,000 jobs in June. That’s a good sign that the economy is growing and producing jobs. But that’s a process the Fed wants to end.

That’s because inflation can’t come down without an economic slowdown. And that means higher unemployment, not lower unemployment.

In other words, the Fed may not be tightening monetary policy enough.

That said, the jobs report does suggest that much of the increase has come from secondary jobs. And that total hours has started to decline. That also may be an early sign that the job market is about to slow down significantly. Significantly, that’s showing up in rising unemployment claims.

Another factor is a declining labor force participation rate. It’s starting to tick down. That didn’t happen in 2020, during the rapid Covid selloff. That’s why the world continues to face a labor shortage right now, which may limit how high unemployment could rise.

Bringing down the economy without job losses and higher unemployment is impossible. A fully employed economy has strong demand, and that could continue to add to inflationary pressure for longer than expected.

To see the full analysis and data behind the Fed’s confusion, click here.