Fed Forced to Balance Hot Labor Market and Recession Risk
Interest rate hikes are expected to continue as both inflation and the labor market remain uncomfortably hot. According to the U.S. Bureau of Labor Statistics, there was an addition of 261,000 jobs in October.
But with taming inflation and cooling the job market comes a serious risk of recession. "The Federal Reserve faces the difficult task of cooling down a searing-hot labor market, and aggressive rate hikes will ultimately tip the US economy into a deeper recession than what Europe will likely see, according to Bank of America," reads an article from Markets Insider.
So far, the area where inflation is cooling is goods, like vehicles and apparel, which showcases improved supply chains and shifted spending patterns toward services, per Bloomberg. But those conditions haven't changed the price pressures from services. "Either way, a still-tight labor market underscores what's likely to be a relatively slow decline in the coming months for inflation, which has been a major factor in this week's midterm elections," the article reads. "The overall annual inflation rate exceeded forecasts in six of the prior seven months."