If you have read the past two Talent Talk columns — "Surprise, Not a Surprise" posted on Oct. 19 and "Why I’m Hiring, and Why You Should Be, Too" from Oct. 24 — you will probably think I am overly fixated on what is happening with the economy and the jobs market. You would be correct. But I am increasingly starting to think that Federal Reserve Chairman Jerome Powell is taking his cues from us.

Last Wednesday, Chairman Powell announced yet another 75-basis point increase to the federal funds rate. This was widely expected and should have already been priced into the bond and stock markets. Why, then, did the Dow Jones drop by more than 800 points between his afternoon press conference and the end of the trading day?

In the Oct. 19 Talent Talk, we said of the interest rate hikes: “Here is the thing, though. It really isn’t working.” On Nov. 2, Chairman Powell essentially said the same thing. In the Oct. 24 Talent Talk, I speculated that interest rates might need to go to the 6% range, quite a bit higher than most were predicting. On Nov. 2, Powell said: “The pattern has been that one after another they go up, and that will end when it ends.” He was referring to the Summary of Economic Projections, the Fed’s “best guess” on things like the longer-term federal funds rate.

In the July 11 Talent Talk, we noted that 11.3 million jobs were open. The government report that just came out updated that number to 10.7 million, after four months of Fed tightening. There are still 1.9 jobs for every available worker, unchanged over that same period. On Nov. 2, Powell said: “The job losses may turn out to be less than would be indicated by those traditional measures because job openings are so elevated, and the labor market is so strong.”

Might the Fed overshoot and cause a recession? I think probably so, and the chairman admitted that the path for a soft landing has narrowed. But unlike other recessions, it will not be led by the job market, and companies should continue with their hiring plans. Last Friday, the Labor Department reported that US payrolls surged another 261,000 in October.
 

About the author

Paul Sturgeon is CEO of KLA Industries, a national search firm specializing in plastics, packaging, and polymer technology. If you have a topic you would like to see discussed, a company that is growing, or other ideas for this blog, e-mail Sturgeon at [email protected].