BlackRock portfolio manager Jeff Rosenberg said Friday that a surprisingly robust August employment report places the burden on upcoming inflation data as Federal Reserve policymakers weigh whether to raise interest rates.
Speaking on Bloomberg Television, Rosenberg said the labor-market strength "kind of confirms what we've known about the labor market and puts the focus and the onus back on the inflation." He added: "It's really about inflation going up or not going down fast enough as to whether or not the Fed hikes in the September meeting."
Rosenberg indicated that the central bank is likely to keep rates unchanged if the Sept. 11 consumer price index release shows continued disinflation. That statement frames CPI as the near-term trigger that could sway Fed officials ahead of the Federal Open Market Committee meeting scheduled for Sept. 15-16.
The August payrolls numbers showed nonfarm employment increasing by 162,000, a figure that exceeded consensus estimates, according to Bureau of Labor Statistics data released Friday. The report also removed previously reported job losses for July through revisions. Financial markets reacted swiftly: yields on two-year Treasuries rose after the print and traders boosted their odds of a rate increase at the FOMC gathering.
Rosenberg characterized the current labor market as "low-hire, low-fire," and said that wage inflation no longer represents the principal threat it did amid the Covid-era disruptions. Instead, he pointed to energy as a more immediate inflation risk, noting that increases in energy prices can migrate from headline measures into core inflation.
He highlighted the timing of the jobs report, which arrived hours after AAA reported a record average diesel price at U.S. pumps of $5.85 per gallon, as an example of how energy costs could feed into broader price measures.
Addressing market implications, Rosenberg said that even if the Fed opts for a 25-basis-point hike, investor interest in equities and credit markets is likely to remain intact. He argued that the equity market's trajectory is more dependent on corporate earnings and growth led by technology and artificial intelligence developments than on a single quarter-point adjustment.
On the fixed-income side, Rosenberg suggested that robust credit quality and narrow spreads should help bond markets absorb a modest policy tightening, implying resilience in credit instruments should the Fed act with a limited increase.