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Fed's Daly: Must watch both sides of mandate, situation feels precarious

Low-hiring, low firing environment may persist or may quickly change to a no-hiring, more-firing labor marketBusinesses are cautiously optimistic, workers are not so sure.The signal here — I think — is that the Fed could pivot quickly.The comments are from a short LinkedIn post. Here’s the full text:Is the economic outlook good or bad?If
you talk to businesses, they’re cautiously optimistic. Growth is good,
consumer spending remains solid, jobs are easy to fill, and productivity
gains are helping control costs.Talking
to workers, they’re not so sure. You can see this in the latest
sentiment surveys, which show that Americans are expecting fewer jobs to
be available and the unemployment rate to rise.In
many ways, this disconnect makes sense. We’ve been in a relatively
low-hiring, low-firing environment for some time. That may persist, but
workers are aware that things could change quickly, leaving them in a
no-hiring, more-firing labor market. With inflation printing above the
FOMC’s 2 percent goal, this rightly feels precarious.What
does this mean for policy? We must watch both sides of our mandate.
Americans deserve both price stability and full employment, and we can’t
take either for granted.
This article was written by Adam Button at investinglive.com.

🔗 Source

💡 DMK Insight

The current labor market’s cautious optimism from businesses contrasts sharply with worker sentiment, hinting at potential volatility ahead. If the Fed perceives a shift towards a no-hiring, more-firing environment, we could see rapid changes in monetary policy, which would directly impact market liquidity and risk appetite. Traders should keep an eye on economic indicators like unemployment rates and job creation numbers, as these will signal whether the Fed might pivot on interest rates. A sudden uptick in layoffs could trigger a sell-off in equities and risk assets, while a stable job market might support bullish sentiment. Here’s the thing: mainstream coverage often overlooks how quickly sentiment can shift in labor markets. If businesses start cutting jobs, it could lead to a cascading effect across sectors, particularly in consumer discretionary stocks. Watch for key employment reports in the coming weeks; they could be the catalyst for market movements. If the Fed pivots, it could create opportunities in both equities and bonds, depending on how they react to the changing economic landscape.

📮 Takeaway

Monitor upcoming employment reports closely; a shift in labor market dynamics could trigger significant market reactions, especially in equities and bonds.

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