Service Jobs Slowdown Should Help Powell Sleep
A busy week of data indicates that the labor market is cooling in the areas the Federal Reserve chair cares most about.
Fed Chair Jerome Powell should like what he sees.
Photographer: Al Drago/Bloomberg
Hiring appears to be decelerating at US service-providing businesses, and Federal Reserve Chair Jerome Powell must be pleased.
While markets tend to view labor market cooling as a necessary precondition for tamer inflation and lower interest rates, Chair Powell has placed special emphasis on the developments at service companies. As he sees it, service businesses (salons, hospitals, hotels, etc.) are more sensitive to labor costs than their goods-producing counterparts. And if you’re going to find inflationary pressures anywhere in the labor market, that’s where you’re most likely to do so, as Powell reasoned at his press conference last week (emphasis mine):