Powell Softens Stance

In a speech Wednesday, Federal Reserve Chairman Jerome Powell seemed to signal a potential slowdown in interest rate hikes. Powell said, “the time for moderating the pace of rate increases may come as soon as the December meeting.” Though the Chairman acknowledged some “promising developments” in the economy, he maintained a cautious approach, saying, “we have a long way to go in restoring price stability.” 

Titan’s Takeaway

While Powell did signal a downshift in the Fed’s tightening pace next month, rates are likely to stay at restrictive levels for some time. The market reacted positively to the news, with the S&P 500 ticketing higher, the dollar turning lower, and treasuries trimming their losses. However, with inflation still materially above the Fed’s 2% target, higher levels of interest rates are likely here for a while.

Private Hiring Slows

127,000 jobs were added in the private sector in November, according to ADP, materially below estimates and a slowdown from the 239,000 added in October. Leisure and Hospitality continue to add workers, but steep drops in manufacturing, financial activities, and information services are a sign that the labor market is loosening. Job openings also fell to 10.3 million from 10.7 million a month earlier. 

Titan’s Takeaway

The Fed’s monetary tightening is beginning to have a material impact on the labor market as companies turn to cost-cutting measures instead of growth. The continued slowdown in the labor market could be a key measure the Fed is waiting for to slow the pace of its rate hikes.