My recent post, The End of the Beginning, discussed the process by which the FED’s interest rate hikes should slow the economy, and ultimately, ease inflationary pressures. Typically, increases in rates impact housing, orders for goods, corporate profits, and employment in that order. I pointed out that we are seeing a material slowdown in home sales as well as early indications of softness in home prices. There are also early signs of weakening in orders but both profits and employment have been robust. Employment data for November was just released and it confirms that the labor market remains incredibly strong.
As shown, there are 10.5 million job openings while just 6 million people are unemployed. The key conclusion is that the FED’s efforts to reduce inflation are still in the early innings and that interest rates will therefore continue to rise and remain at higher levels for some time.