Payden & Rygel: No urgent need to reduce policy rates

Payden & Rygel: No urgent need to reduce policy rates

March 11, 2024

Labor force
On the move - mensen - werkloosheid.jpg

The Employment Situation report ('jobs report') dominates market commentary in the first week of the month. And for good reason since it's a timely gauge of labor market health. But, with the Job Openings and Labor Market Turnover Survey (JOLTS) release earlier this week, we can tell a bigger story.

First on the demand side of the market, total employment rose by 2 million, plus job openings have fluctuated around 9 million for seven months. Meanwhile on the labor supply side, total labor force has increased by 2.5 million over the last year.

Putting two and two together, in the words of Fed Chair Jerome Powell as he sat before Congress this week, 'The labor market remains relatively tight, but supply and demand conditions have continued to come into better balance.'

Historically, wage growth accelerates when labor demand exceeds supply, as it did briefly in 2018-2019 and during the recent inflation era. In short, while policymakers welcome the "better balance", it's hard to argue there is an urgent need to reduce policy rates.

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