Warsh Keeps Hawkish Stance Despite Cooling Jobs Market
Despite a cooling jobs market in August, Federal Reserve Chair Kevin Warsh has maintained his hawkish stance on interest rate hikes. The latest ADP report showed that private employers added just 38,000 jobs last month, well below the consensus estimate of 47,000.
This number marks the weakest monthly gain since January, but not a broad collapse in hiring. According to Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, the data show cyclical and white-collar losses offset by hiring in less cyclical industries.
Warsh's bigger concern is inflation, which he considers a priority over labor market conditions. He noted that 12-month PCE inflation stood at 3.7%, while the six-month measure was 4.1%. The consumer price index could matter more than payrolls in the decision to raise rates.
Next week's inflation data is potentially more important than Friday's jobs headline, with Warsh emphasizing that the Fed must be confident that underlying inflation is moving towards its objective 'clearly and at sufficient speed'. Otherwise, there's work to do.