Chief Strategist Warns Fed on Economic Misdirection: Jobs vs. Inflation

Fed's Inflation Focus Questioned

• 💡 The Federal Reserve's current focus on inflation is questioned, with the strategist noting that inflation was a problem the Fed struggled to understand even in 1999.
• ⚠️ The current Fed sees inflation as a greater threat than job growth, a stance that is considered confusing given the economic data.

Declining Job Growth and Productivity

• 📉 Private sector job creation averaged only 636 jobs per month last year, excluding healthcare and private education.
• 📊 Unit labor costs declined by 2.4% in Q3 2025, and productivity is rising, suggesting companies are getting more output from fewer workers.
• 😩 This rise in productivity is framed not as a miracle, but as workers being more exhausted and grateful to keep their jobs.

Worker Confidence and Spending Collapse

• 📉 Confidence in finding another job if laid off has plunged to its lowest level since 2012, according to the New York Fed.
• 💸 This lack of confidence is translating into a collapse in discretionary spending, with people cancelling vacations and not planning for the future.
• 🎯 The economy needs private job creation, but workers are increasingly scared about their employment prospects.

Stock Market Disconnect

• ⚠️ Falling inventories and declining new orders suggest a weak economic foundation, yet the stock market is moving in the opposite direction.
• 📈 This disconnect is attributed to passive flows into 401(k)s rather than fundamental economic drivers.
• 📉 The stock market is propping up net worth, but this is concentrated in a few stocks and may not be sustainable.

Recommendations for the Fed

• 📌 The Fed should pay attention to the crippling borrowing expenses faced by small businesses and individuals.
• 📉 The strategist advises the Fed to lower interest rates, arguing they are not paying attention to the right data or making policy for the broader population.