The Fed ‘will end up killing the labor market,’ says economist

The Federal Reserve is being too aggressive with its stance on interest rates and could send the labor market into a tailspin, warns MKM Partners chief economist Michael Darda.

“I think households here are also caught in the Fed’s crosshairs because the tightening is likely to continue until it kills off the job market,” Darda said on Yahoo Finance Live (video above). “They [the Fed] they will kill inflation, but they will end up killing the labor market.

Cracks in the labor market are piling up as the economy slows amid determined rate hikes by the Fed.

U.S. Federal Reserve Board Chairman Jerome Powell speaks during a news conference following a Federal Open Market Committee (FOMC) meeting at Federal Reserve headquarters on June 15, 2022. in Washington, DC. (Photo by Drew Angerer/Getty Images)

This week there were reports that Intel laid off thousands of workers amid a slowdown in PC sales. (Intel declined to comment to Yahoo Finance on the matter.) Beyond Meat is court 19% of its workforce. Meta is also reportedly shedding workers, and other tech companies began cutting or freezing hiring earlier this year.

US-based employers announced 29,989 job cuts in September, a 46.4% increase from August, according to recent data from relocation company Challenger, Gray & Christmas. The figure is an impressive 67.6% higher than in the same month last year.

September marked the fifth time this year that job cuts were higher in 2022 than the same month a year ago, the data showed.

Darda warned that American workers should be prepared for the flow of job-related news to worsen in the future.

“The labor market has been very strong and resilient,” Darda explained. “That’s been the saving grace. But this inflationary backdrop has certainly irked households. We can see it in a lot of weak sentiment data. So far, that hasn’t been enough to stop the economy in its tracks. But we do have the Fed tighten very aggressively, and that will affect the economy with a delay.

brian sozzi is a general editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and in LinkedIn.

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