Daly Sees Further Tightening as U.S. October Jobs Rise to 165,000
Key Facts
Mary Daly, president of the Federal Reserve Bank of San Francisco, said on Friday, November 6, that the U.S. central bank will likely need to tighten monetary policy further to bring down elevated inflation. She added that her expectation is that "we need to tighten policy more." Her remarks came as an October report showed nonfarm payrolls rising by 165,000, exceeding the average monthly gain over the previous 12 months. That puts labor market strength alongside elevated inflation at the center of the debate over the path of monetary policy. Daly did not specify the timing or size of any further tightening.
Daly said the timing and extent of tightening remain unclear, and that volatile conditions call for gathering more information and moving gradually. Policymakers must "take that volatility into account, gather more information, and move carefully and at a more gradual pace," she said. At the same time, she left open the possibility of further tightening, depending on what economic performance requires. The remarks outline a path that combines continued inflation pressure with caution in assessing shifting data. Daly did not say the decision depends entirely on incoming data.
Her remarks came as technology stocks underwent what she described as a painful but orderly repricing. Reuters linked the move to investors reassessing the risks to demand growth tied to artificial intelligence. Daly said investors are reconsidering "the risks to AI-driven demand growth." That places technology-stock volatility within the backdrop in which she called for gathering more information before taking monetary action. In the bond market, the 10-year U.S. Treasury yield rose to 4.86% on Friday from 4.84% at Thursday’s close, according to the Associated Press.
The Bureau of Labor Statistics report showed the unemployment rate at 4.1% in October, remaining within a range of 4.1% to 4.3% since March. Total nonfarm payrolls also increased by 165,000, compared with an average monthly gain of 48,000 over the previous 12 months. The bureau revised the August jobs increase to 186,000 from 133,000, and the September increase to 60,000 from 29,000. The combined increase for the two months was therefore 84,000 higher than previously reported. The figures show October’s jobs growth came after revisions lifted estimates for the two preceding months.
Average hourly earnings for private-sector, nonfarm employees rose 0.4% month over month in October, reaching $38.00. In the 12 months through October, average hourly earnings increased 3.1%. Sectoral job gains came from professional and business services, which added 70,000 jobs; health care, which added 42,000; and transportation and warehousing, which added 25,000. These figures detail the sources of employment growth in the monthly report. Wage and job growth are among the labor market data monitored by markets and monetary policymakers.
Federal Reserve Governor Christopher Waller is scheduled to speak on November 10 on "The Economic Outlook" at the Bank of England and Observers Conference in London. An October Consumer Price Index report was also scheduled for release that day at 08:30 a.m. Eastern Time. Before the report, economists expected annual inflation to reach 3.9% in October, compared with 3.7% in September. This was a forecast, not a published result, as the figure had not been released when the article was written. The report’s release date puts inflation expectations among the data due after Daly’s remarks.