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: ‘Fed’s Powell will have to walk a tightrope’: What economists are saying about December jobs report

The December jobs report released Friday presented a confusing picture, say economists. On one hand, the U.S. economy added a fewer-than-expected 199,000 jobs last month, while on the other hand, the unemployment rate fell to 3.9% from 4.2%.

Read: U.S. creates lackluster 199,000 jobs in December

Economists surveyed by the Wall Street Journal had expected a gain of 422,000 jobs. The unemployment rate was forecast to slip to 4.1%.

Below are initial reactions from economists as U.S. stocks DJIA, -0.18% SPX, -0.53% were lower in the wake of the report. The yield on the 10-year Treasury note TMUBMUSD10Y, 1.776% moved higher, briefly touching 1.77% before retreating.

Federal Reserve Chairman Jerome Powell will provide his view of the data on Tuesday when he testifies to the Senate Banking Committee. That panel is considering his nomination for a second four-year term.

“This latest jobs report will comfort the Fed into thinking its hawkish policy pivot is justified. Still, in the context of a rapidly deteriorating health situation, the first quarter lull in economic activity will force Fed Chair Powell to walk a tightrope at the upcoming policy meetings. Sounding excessively hawkish could appear tone-deaf, leading to an uncontrolled tightening of financial conditions and negative spillovers to economic activity.” — Gregory Daco, chief U.S. economist at Oxford Economics.
“The U.S. labor market may have lost a little momentum at the end of a stellar year, largely due to the lack of available workers rather than available positions, but it is holding up nicely, at least so far. January will paint a weaker picture, and the remaining months are in the hands of the latest COVID wave.” — Sal Guatieri, senior economist at BMO Capital Markets.
“We think that today’s report adds to the case for the Fed to kick off its hiking cycle in March. The economy appears to be operating below maximum employment and inflation remains sticky-high. While omicron [COVID variant] adds to the uncertainty in January, it doesn’t change the overall picture of the economy and labor market.” — Stephen Juneau, U.S. economist at Bank of America Securities.
“Nothing in this morning’s employment report takes me off the idea… that the Fed will liftoff in March as it has telegraphed. The labor market is clearly very tight by almost any indicator. The Fed… doesn’t have much choice but to dial back aggregate demand.” — Glenn Hubbard, former White House chief economist under President George W. Bush, during a presentation at the annual meeting of the American Economic Association.

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