Category: Economy

Interest rates could remain at their record lows “forever,” according to one asset manager, despite a recent rush to normalize policy by many of the world’s central banks.

GAM Investments’ Julian Howard told CNBC’s “Squawk Box Europe” last week that he believed it was “entirely consistent historically to talk about low rates forever.”

Howard is the lead investment director of multi-asset solutions at GAM, which has 103 billion Swiss francs ($112 billion) in assets under management.

He cited research by economic historian Paul Schmelzing, who was a visiting scholar at the Bank of England when the paper was published in 2020.

The research looked at interest rates globally dating back to the 14^th century, identifying a downward trend, with Schmelzing predicting that “real rates could soon enter permanently negative territory.”

Howard said the lower rates that we had seen in recent years were, therefore, “actually a return to a very, very long-term trend of yields falling over an extended period of time.”

He pointed to the economic damage caused by the coronavirus pandemic and climate change, which is set to have a “very, very negative effect on interest rates,” he added.

“There’s no context in which a central bank will be able to normalize, sort of 1990s style normalize, interest rates when there’s going to be absolutely no growth,” Howard explained.

Howard expected that the Federal Reserve would probably only start raising interest rates in the second half of 2022.

Rep. Jim Himes, D-Conn., told CNBC Tuesday that low interest rates and the “free money” that we had seen for many years, risked creating asset bubbles.

This is when the price of an investment rises rapidly, but the jump not necessarily reflecting the asset’s underlying value.

Himes added that low rates had also resulted in “remarkably odd financial behavior,” such as the “near-cult” growth of special purpose acquisition companies, or the “dumping of money into meme stocks,” which are companies that have gained surprise popularity on social media and have seen their share prices spike.

Himes suggested that it was the responsibility of the Federal Reserve to manage such risks around low interest rates.

He said: “I fought my entire career to make sure monetary policy does not get influenced by the tender mercies of political people in the Congress but I think … we’re taking a turn there and hopefully that will begin over time to maybe take some of the risk out of what are pretty clearly some asset bubbles out there.”  

The Fed has started to normalize policy after the economic fallout from the coronavirus pandemic. It said earlier in November that bond purchases would start to taper “later this month” and acknowledged that price increases had been more rapid and enduring than central bankers had forecast.

The Fed also voted not to raise interest rates from their anchor near zero, and warned against expecting imminent rate hikes.

Consumer confidence hit a 10-year low in November as inflation climbed to the highest levels since the early 1990s, complicating efforts from policymakers to sell the case that the current surge of price increases is temporary.

The plunge in sentiment happened as workers quitting their jobs hit a fresh record in a labor market that has nearly three million more positions available than there are people looking or jobs.

In a sign of confidence in the labor market, 4.43 million people quit, part of what some have called “The Great Resignation,” the Labor Department reported Friday. That number topped August’s 4.27 million and bought the quits rate as a percentage of the labor force to 3%, also a record.

At the same time, the University of Michigan Consumer Sentiment Index tumbled to 66.8 for November, according to a preliminary reading Friday. That was the lowest since November 2011 and well below the Dow Jones estimate of 72.5. October’s reading was 71.7, meaning that the November level represented a 6.8% drop.

The survey showed consumers expecting still-higher rates of inflation, with the 12-month forecast nudging up to 4.9%.

“Consumer sentiment fell in early November to its lowest level in a decade due to an escalating inflation rate and the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation,” said Richard Curtin, the survey’s chief economist.

The survey showed 1 in 4 consumers reducing their living standards due to price increases, while half of all families anticipated lower real income in the year ahead when adjusted for inflation.

Seemingly robust increases in average hourly earnings, which rose 4.9% in October from a year ago, still have not kept pace with inflation, bringing real wages down by 1.2% from the same period in 2020.

“Rising prices for homes, vehicles, and durables were reported more frequently than any other time in more than half a century,” Curtin added.

The gauge also indicated a low level of belief that policymakers are acting appropriately to handle inflation, which ran at a 6.2% rate for October, according to the consumer price index released Wednesday.

The news on consumer sentiment comes with President Joe Biden‘s popularity levels dropping as consumers increasingly worry about inflation.

Earlier this week, the White House rolled out a few proposals to try to help, including trying to alleviate cargo backlogs at major ports. Tie-ups in supply chains are helping drive the price increases, as is strong demand from consumers and escalating gas prices as the administration has sought to clamp down on fossil fuels.

The Federal Reserve faces a similar dilemma as it seeks to meet its mandate for price stability without raising interest rates. Central bank officials said last week they expect to start withdrawing their policy support, but only incrementally with small reductions in monthly bond purchases until the program is finished, likely by early summer 2022.

Republican critics blame the trillions in government spending and loose Fed policy for helping fan the inflation fire. Both Biden and Fed Chairman Jerome Powell have said they expect the inflationary pressures to ease later next year.

Despite the continued decline in how people feel about the economy, workers again left their jobs in record numbers during September.

The September total was 1.1 million higher for the same month a year ago, when the quits rate was just 2.3%.

At the industry level, the quits rate for leisure and hospitality rose to 6.4%, a 0.3 percentage point gain from a month ago and owing to a big jump in arts, entertainment and recreation, which surged to 5.7% from 3.2%. Accommodation and food services held steady at 6.6%, the highest of any industry, as is typical.

Those who have quit their jobs this year largely have gone onto positions with higher salaries.

The Atlanta Fed’s wage growth tracker shows pay up 3.6% overall in September from a year ago, with job switchers seeing a 4.3% increase. Gains have been skewed to higher earners, with the top quartile seeing a 12-month increase of 4.9%.

Hires totaled 6.46 million for the month, a slight decline from August.

That exodus from current positions came as available jobs remained elevated.

The Labor Department in its Job Openings and Labor Turnover Survey said there were 10.44 million employment openings, well above the 7.68 million people looking for jobs in September. JOLTS data runs a month behind the department’s widely watched nonfarm payrolls report.

Job openings in September were expected to total 10.46 million, according to FactSet.

A record-high 4.4 million people, or 3% of workers, quit their job in September, according to the Labor Department’s latest Job Openings and Labor Turnover Survey released Friday.

The tight market, where workers have more leverage to move around and employers are doing everything they can to staff up, is already impacting the holiday shopping season, ZipRecruiter chief economist Julia Pollak tells CNBC Make It.

And there’s reason to believe quitting will continue well into 2022.

High turnover is primarily concentrated in essential frontline industries where jobs can’t be done remotely. Some of September’s biggest losses come from the already strained leisure and hospitality, retail, manufacturing and health services industries. People left their jobs fastest in the Southern region of the country.

With the pace of quitters, Pollak says, “employers are basically having to replace their entire staff in just a couple of months. It’s really quite dramatic.”

Quits increased the most in arts, entertainment and recreation (like people who staff live events); other services (which ranges from auto workers to hairstylists to laundry workers); and local and state government jobs.

So far, roughly 34.4 million people have quit their jobs this year, with more than 24 million doing so since April. By comparison, 36.3 million people quit their job in all of 2020.

The Labor Department reported 10.4 million job openings in September, consistent with previous months, with the largest increases in health care and social assistance; state and local government, excluding education; wholesale trade; and information roles.

But high job openings paired with high quits rates is leading to what Emsi Burning Glass senior economist Ron Hetrick refers to as a game of musical chairs. Employers in strained industries are fighting for the same workers who are quitting at record rates.

As of September, there were seven unemployed workers for every 10 job openings — a record low — giving people the upper hand in being choosy with their next role. Of course, those are nationwide averages. Hetrick says some markets, especially in the South and West, could have even fewer available workers for every job opening.

The largest gaps in openings versus available workers remain in health care, transportation and warehousing jobs that require in-person work and where the risk of contracting Covid-19 remain high, Pollak says.

The U.S. labor market added 531,000 jobs in October, an improvement from a sluggish September, led by roles in leisure and hospitality; professional and business services; manufacturing; and transportation and warehousing.

Businesses are doing everything they can to staff up for the holiday shopping season, including offering flashy hiring bonuses, retirement benefits, tuition assistance and other perks not usually offered to lower-wage workers, Pollak says.

Still, it may not be enough to get people into the workforce to keep pace with skyrocketing consumer demand. Already, airlines are having to cut flights and manufacturers are signaling shipping delays due in part to staffing shortages.

The high consumer demand paired with labor shortages is creating a “traffic jam” that will continue into the holiday season, Pollak says. Workers willing to take on seasonal, often in-person work, could benefit from higher wages and attractive benefits: “That huge additional demand is putting enormous strain on employers to expand their capacity in a constrained labor market,” Pollak says.

The current period of historic turnover can be “an exciting moment for job seekers who are benefiting from employers offering hiring incentives and reducing their requirements” or time to hire, Pollak says.

People who change jobs are seeing faster wage growth than people who stay. And hiring incentives, along with a pandemic-low unemployment rate, could encourage people not in the labor force to re-enter while the market is hot.

But with the quits rate 30% higher today than it was in February 2020, Hetrick doesn’t expect record turnover to cool before the end of the year. He has his eye on the labor force participation rate, or a measure of how many people are working or actively looking for work, which has held steady for months at 61.6%, down 1.7 percentage points from pre-pandemic levels.

There are 5 million fewer people in the labor market today than there were prior to the pandemic. Hetrick expects more will re-enter the labor force as their personal savings rates, buoyed by stimulus funds, runs down, possibly as early as the spring of 2022.

“You’re seeing an economy where leaders have rushed to adapt by raising wages,” Pollak says, “and followers slower to adapt, due to regulation or institutional arrangements, will be under enormous pressure to make changes to catch up. As they play catch-up, you’ll see more demand for workers, and exciting outside opportunities for workers who can quit.”

Check out:

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More than half of October’s job gains went to women

A counterintuitive trick to decide whether a new job offer is really worth it

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The IRS announced higher federal income tax brackets and standard deductions for 2022 amid rising inflation.

The consumer price index surged by 6.2% in October compared to the previous year, the biggest jump in more than three decades.

As price hikes continue, the IRS has boosted the income thresholds for each bracket, applying to tax year 2022 for returns filed in 2023.

These brackets show how much someone pays for federal taxes on each portion of their income after subtracting deductions and credits.

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The standard deduction, claimed by most taxpayers, will also increase for 2022, rising to $25,900 for married couples filing jointly, and to $12,950 for single filers.

The IRS also made other inflation adjustments, such as changes to the alternative minimum tax, a parallel system for higher earners, and an increased estate tax exemption.

Moreover, there’s a boost for the earned income tax credit, a write-off for low- to moderate-income families, and higher flexible spending account limits, among other changes.

Workers may also save more to 401(k) plans in 2022, according to last week’s announcement. But there won’t be a higher limit for individual retirement accounts.

Household debt passed $15 trillion for the first time in the third quarter, as rising prices pushed up balances for homes and autos, the New York Federal Reserve reported Tuesday.

Mortgages rose 2.2% to nearly $10.7 trillion, and autos increased $28 billion as part of an overall $286 billion increase in debt that brought the total household burden to $15.24 trillion. That’s up 1.9%, or $286 billion, from the second quarter.

The household debt growth represented a 6.2% gain from the same period a year ago.

The report covered the July to September period, part of a time when U.S. economic growth slowed to a 2% annualized pace amid worries over surging inflation and a pandemic-induced slowdown.

Housing debt accelerated with $1.11 trillion in newly originated mortgages, more than two-thirds of which came from those with credit scores above 760 and just 2% to subprime borrowers, the Fed report said. The trend comes with median housing prices up 19.9% for the quarter to more than $404,700, according to the Census Bureau.

Education loan debt crept higher by $14 billion to $1.58 trillion as students went back to college, according to the report. Just 5.3% of the loans were in serious delinquent or default status as a government forbearance program extends through Jan. 31.

Despite worries over growth, credit card balances increased by $17 billion to around $800 billion for the quarter, reversing a trend that began with the pandemic as consumers paid down revolving debt.

“As pandemic relief efforts wind down, we are beginning to see the reversal of some of the credit card balance trends seen during the pandemic, namely reduced consumption and the paying down of balances,” New York Fed research officer Donghoon Lee said. “At the same time, as pandemic restrictions are lifted and consumption normalizes, credit card usage and balances are resuming their pre-pandemic trends, although from lower levels.”

Officials stressed that even with the rising debt loads, delinquency rates remain low and are declining, due in large part to an influx of government payments that have led to elevated levels of saving and personal income.

Credit scores for mortgage originations “remain very high,” the report said, even though they have declined slightly since the early days of the pandemic.

Newly originated auto loans totaled $199 billion, a slight decline from the previous quarter’s pace and reflective of higher loan amounts rather than a greater volume. New auto prices rose 8.7% in September from a year ago, while used car and truck prices climbed 24.4%, according to Labor Department data.

Consumers see escalating inflation ahead.

A separate report Monday from the New York Fed showed that while inflation expectations over the three-month horizon were unchanged at 4.2%, the one-year outlook sees prices rising 5.7%, the highest in a data series that goes back to 2013.

Karen Hilt owns My Secret Stash in Traverse City, Michigan, retailing products from local artists and sellers— and business has been booming. Hilt’s feeling optimistic about the upcoming holiday season, so much so that she’s gearing up to open a second location.

But like many small business owners, she’s staring down an ongoing labor crunch, and staffing the new store remains a challenge.

A recent poll from the National Federation of Independent Business found nearly half of owners it surveyed were experiencing either significant or moderate staffing challenges.

“Between both locations I have six, and I would love to have 10 or 12 workers. That would make me a lot happier,” Hilt said.

To take up the slack she added, “I’m working pretty much seven days a week, morning, noon and night.”

Hilt’s upbeat holiday sales outlook is echoed by the National Retail Federation, which expects a roaring season, with sales during November and December projected to rise between 8.5% and 10.5% for a total of between $843.4 billion and $859 billion of sales. The projection tops last year’s numbers and would mark a new all-time high, even as a triple whammy of labor shortages, supply chain woes and inflation hit companies nationwide.

“If retailers can keep things on their shelves, and that shippers can get the goods delivered to people’s homes by Christmas, it’ll be really a banner year for holiday spending,” said Jack Kleinhenz, chief economist at the NRF, who noted the staffing issue hits not only retailers in stores and online, but in the supply chain.

Supply chain disruptions and worker shortages could put a crimp in the party. According to the NFIB, 48% of small businesses say supply chain disruptions are having a significant impact. Of those who rely on holiday sales for a significant part of yearly revenue, 38% anticipate such shortages will impact sales.

“We are seeing a shortage of workers in distribution and warehouse. Part of that is the timing of getting the products, even from the port, to the timing of these of these products getting into a distribution and warehouse area. They’re juggling hours, they’re juggling people, and people are working long hours,” Kleinhenz said.

Retail job openings hit 1.3 million in August according to data from the Bureau of Labor Statistics, and Challenger, Gray & Christmas projects 700,000 workers will be hired this season. The retail sector added 35,000 jobs in October according to BLS. Amazon, Target and Walmart and others are looking for hundreds of thousands of workers and bumping wages, offering bonuses and more to recruit.

Baltimore-based Under Armour said it’s entering the holiday season with more teammates than it’s had in years past in its retail stores. The company has hired 1,000 seasonal workers and is seeking 1,000 more workers to be brought on over the next few months.

UA credits a new in-store incentive program for all retail employees, seasonal, full-time and part-time, that allows for bonuses monthly that can equate to 8% or more of their take-home pay— in addition to a $15 an hour starting pay, up from $10 an hour this summer, to its staffing success so far.

“We are in one of the most competitive environments that we’ve seen in a very long time, particularly in retail stores. I think that our decision earlier on in the year to increase that starting wage from $10 to $15, certainly helped us get ahead of the holiday hiring that we’re in right now,” Stephanie Pugliese, UA President of the Americas.

“The holiday season is always a big peak time for any retailer to hire and make sure that we have enough teammates to satisfy the consumer demand, it really is a long-term investment that we have in the talent of our business. We’ve built our plans around investing in that talent on the go forward.”

Back in Michigan, Hilt said she isn’t immune to the supply chain hiccups rippling through the industry, but as bigger retailers face a lack of product, she’s positioned herself to succeed by selling local goods like house plants. Sales of plants really took off during the pandemic as homebound customers sought to spruce up their environments – and their zoom meetings.

“We are definitely beating our projections from years prior, and our customers are happy—we love that everybody’s putting that focus into shopping local,” Hilt said. “I don’t have a lot of product hung up on a ship anywhere.”

Still, she’s paying well above minimum wage and offering extra perks like free lunches to workers. And most of all, she’s hoping small changes will help make the customer experience better in the face of thin staffing.

“I feel like here’s some lemons and let’s make a whole bunch of lemonade,” Hilt said. “Having some people come in and do the stock before or after we’re closed, because if we do that when we’re open, that is detrimental to the experience for our customers who are in front of us, who did take the time to come out and want to do some fun shopping. They want us to be present for them, so we’re trying to just look a little more creatively.”

CNBC’s Betsy Spring contributed to this story.

President Joe Biden met with Federal Reserve Chairman Jerome Powell and Governor Lael Brainard on this week as the administration decides whom to nominate to lead the central bank for the next four years, according to a person familiar with the matter.

Powell and Brainard, who met with Biden separately, are seen as the two most likely candidates to lead the globe’s most powerful central bank, which sets interest rates, works to control inflation and oversees the country’s largest banks.

The person told CNBC that the president has not made a final decision on who will lead the Fed. Washington and Wall Street expect a choice in the coming days.

The Democrat-controlled Senate would likely confirm either candidate as Fed chief. The Republican Powell could face resistance from progressives, and the Democrat Brainard would face opposition from the GOP.

At least a handful of moderate Democrats, and virtually every Senate Republican, would be expected to support Powell as an endorsement of his steady hand at the Fed.

The central bank flooded the U.S. economy with cash in the spring of 2020 to combat the spike in unemployment and recession sparked by the Covid-19 outbreak in the U.S. Wall Street credits the big-ticket monetary policy for stabilizing financial markets and keeping interest rates low.

Brainard is widely considered the top candidate for the open vice chair for supervision post if she is not tapped as chair. In that role, Brainard would become one of the nation’s top banking regulators and a key deputy to the chair.

Some progressive Democrats support her candidacy, arguing that Powell hasn’t pushed the Fed hard enough on issues like the economic effects of climate change or income inequality.

One progressive, Sen. Elizabeth Warren of Massachusetts, said in September that to leave Powell as chair would be a mistake. She added that the Fed’s recent rollback of banking regulations makes the central bank chief a “dangerous man.”

Earlier this week, the Fed announced that it will begin to taper its regular asset purchases used to help stimulate the economy during the pandemic.

The central bank has been buying $120 billion in Treasury bonds and mortgage-backed securities since spring of 2020 in an effort to ensure markets have easy access to liquidity and keep interest rates repressed.

It hasn’t said when it will begin to raise interest rates, and isn’t expected to do so for at least several months.

— CNBC’s Kayla Tausche contributed reporting.

Broad-based strength in hiring in October signals the economy is shaking off the Covid-related slump of the third quarter and could grow faster than expected in the fourth quarter.

Employment increased by 531,000 in the month, with gains in many categories, including manufacturing, hospitality, professional and business services. The unemployment rate fell to 4.6%. Revisions to prior months’ data also added a total of 235,000 more payrolls in August and September.

“We’re reaccelerating as the delta wave abates and given the revisions, we’ve weathered the storm,” said Diane Swonk, chief economist at Grant Thornton. “It suppressed spending as people were afraid of the contagion during the delta wave, but it didn’t derail underlying employment, and now we’re picking up again.”

The economy slowed in the third quarter, as supply chain disruptions and Covid hampered activity. Gross domestic product grew by just 2%. Swonk had expected growth of 5% in the fourth quarter, but now she says it could be higher.

“It could be a little stronger with these numbers. There’s no question we’re going to end on a high note,” she said.

Economists had expected 450,000 jobs were created in October, up from September’s revised 312,000. There were some disappointments, including a decline in local and state government education jobs of nearly 65,000. Labor force participation also did not make expected gains and was unchanged at 61.6%.

But overall, economists saw the report as positive. “These numbers were great. The private sector is picking up the baton from the public sector,” said Swonk.

“The education losses really reflect the inability of schools to lure back staff workers and deal with the tsunami of retirements,” she added. “Public sector wages are just not going up at the pace of private sector. There’s no way they can compete. They really need to raise wages. These are low-paid jobs that are now competing with Amazon and Walmart.”

Michael Gapen, chief U.S. economist at Barclays, said the employment report shows the economy is back on track after the dip in third-quarter growth. “We’re not going to see what we saw in the first half of the year, but we’re not a 2% economy,” he said.

Wages continued to rise sharply, the latest sign that inflationary pressures are not abating. Gains in average hourly wages were again elevated, rising by 0.4% from the prior month, or 4.9% over the past 12 months.

While the wage component was hot and job growth strong, economists say the report does not change the dynamic yet for the Federal Reserve. However, a few more months of strong jobs growth could cause the central bank to reassess its timetable on winding down its bond program.

The Fed announced Wednesday that it would begin paring its bond purchases, ending the $120 billion monthly program by the middle of next year. Swonk expects the Fed will begin raising interest rates once it ends the program. She said the central bank could re-evaluate its timetable when it meets in December, if job growth remains strong.

Inflation is also a concern of the Fed. A worsening outlook for inflation could also lead policymakers to act faster to end the bond purchases, and begin battling high prices with higher interest rates, economists said.

Stephen Stanley, chief economist at Amherst Pierpont, notes the Fed could be forced to adjust its timing. “A few more reports like this one will bring the economy within hailing distance of full employment. This report is a significant step toward the [Federal Open Market Committee] needing to accelerate the pace of tapering early next year and ultimately having to raise rates earlier than policy makers currently anticipate,” he wrote, adding he expects the Fed to begin hiking interest rates in June.

Economists say the fact that job growth was broad-based was a positive for the economic reopening.

Professional and business services added 100,000 jobs, while manufacturing was also strong with a 60,000 gain. Transportation and warehousing workers increased by 54,400 and retail employment grew by 35,300. Construction jobs increased by 44,000.

Employment in leisure and hospitality increased by 164,000 and is now up 2.4 million in 2021. But the sector is still down 1.4 million jobs, or 8.2%, compared to February 2020.

The U.S. jobs market snapped back in October, with nonfarm payrolls rising more than expected while the unemployment rate fell to 4.6%, the Labor Department reported Friday.

Nonfarm payrolls increased by 531,000 for the month, compared to the Dow Jones estimate of 450,000. The unemployment rate had been expected to edge down to 4.7%.

Private payrolls were even stronger, rising 604,000 as a loss of 73,000 government jobs pulled down the headline number. October’s gains represented a sharp pickup from September, which gained 312,000 jobs after the initial Bureau of Labor Statistics estimate of 194,000 saw a substantial upward revision in Friday’s report.

The numbers helped allay concerns that rising inflation, a severe labor shortage and slowing economic growth would tamp down jobs creation.

“This is the kind of recovery we can get when we are not sidelined by a surge in Covid cases,” said Nick Bunker, economic research director at job placement site Indeed. “If this is the sort of job growth we will see in the next several months, we are on a solid path.”

The critical leisure and hospitality sector led the way, adding 164,000 as Americans ventured out to eating and drinking establishments and went on vacations again as Covid numbers fell during the month. For 2021, the sector has reclaimed 2.4 million positions lost during the pandemic.

Other sectors posting solid gains included professional and business services (100,000), manufacturing (60,000), and transportation and warehousing (54,000). Construction added 44,000 positions while health care was up 37,000 and retail added 35,000.

Wages increased 0.4% for the month, in line with estimates, but increased 4.9% on a year-over-year basis, reflecting the inflationary pressures that have intensified through the year. The average work week edged lower by one-tenth of an hour to 34.7 hours.

The unemployment rate drop came with the labor force participation rate holding steady at 61.6%, still 1.7 percentage points below its February 2020 level before the pandemic declaration. That represents just shy of 3 million fewer Americans considered part of the workforce and reflective of ongoing supply concerns.

“While the strength of employment was an encouraging sign that labor demand remains strong, labor supply remains very weak. The labor force rose by a muted 104,000, which is not even enough to even keep pace with population growth,” said Michael Pearce, senior U.S. economist at Capital Economics.

At the same time, the survey of households showed job holders rising by 359,000, leaving the employment level about 4.7 million below its pre-pandemic level.

A separate measure of unemployment that incudes discouraged workers and those holding part-time jobs for economic reasons fell to 8.3% from 8.5%. That rate was 7% prior to the pandemic.

The report comes amid heightened concerns about the state of the labor market, particularly a chronic shortage that has left companies unable to fill positions to scale back production and cut hours of operation.

Companies have been increasing wages and adding other incentives as the working share of the potential labor force operates well below its pre-pandemic level.

Since adding more than a million jobs in July, the labor market had slowed sharply through the rest of the summer, with sizeable letdowns in August and September as economists greatly overestimated growth in both months.

However, revisions showed that the numbers for those months weren’t quite as dismal. Along with the boost from September’s initial count, August’s final reading came up another 117,000 to 483,000.

Concerns linger, though, that the U.S. economy is slowing. Gross domestic product increased just 2% in the summer months, falling short of even the reduced expectations for gains during the pandemic-era recovery.

Recent data, though, has shown a progressive drop in weekly jobless claims, the result in good part from enhanced unemployment benefits expiring. Data Thursday showed productivity is running at a 40-year low and the trade deficit notched another record high, passing $80 billion for the first time.

Earlier this week, the Federal Reserve said job growth is strengthening enough for the central bank to begin cutting its monthly bond purchases, a cornerstone of its efforts to boost the economy during the pandemic. However, Chairman Jerome Powell stressed that the picture must continue to improve before the Fed starts raising interest rates.

The Federal Reserve announced Wednesday it soon will begin reducing the pace of its monthly bond purchases, the first step toward pulling back on the massive amount of help it had been providing markets and the economy.

Tapering of bond purchases will start “later this month,” the policymaking Federal Open Market Committee said in its post-meeting statement. The process will see reductions of $15 billion each month — $10 billion in Treasurys and $5 billion in mortgage-backed securities – from the current $120 billion a month that the Fed is buying.

The committee said the move came “in light of the substantial further progress the economy has made toward the Committee’s goals since last December.”

The statement, approved unanimously, stressed that the Fed is not on a preset course and will make adjustments to the process if necessary. (How tapering works)

“The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook,” the committee said.

The move was in line with market expectations following a series of Fed signals that it would begin winding down a program that accelerated in March 2020 as a response to the Covid pandemic.

Markets reacted positively, with stocks turning positive and government bond yields inching higher.

Along with the move to taper, the Fed also altered its view on inflation only slightly, acknowledging that price increases have been more rapid and enduring than central bankers had forecast but still not backing off use of the controversial word “transitory.”

“Inflation is elevated, largely reflecting factors that are expected to be transitory,” the statement said. “Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors.”

Many market participants had expected the Fed to drop the transitory language in light of the persistent inflation gains.

“The Fed unveiled its QE taper today, as widely expected, but is still insisting that the surge in inflation is ‘largely’ transitory, which suggests the doves still have the upper hand,” wrote Paul Ashworth, chief U.S. economist at Capital Economics.

Fed Chairman Jerome Powell said he expects inflation to keep rising as supply issues continue and then start to pull back around the middle of 2022.

“Our baseline expectation is that supply chain bottlenecks and shortages will persist well into next year and elevated inflation as well,” he said. “As the pandemic supplies, supply chain bottlenecks will abate and growth will move up and as that happens inflation will decline from today’s elevated levels.”

The statement also noted that the economy is expected to continue improving, particularly after the supply chain issues are resolved.

“Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation,” the committee said.

The FOMC voted not to raise interest rates from their anchor near zero, a move also expected by the market.

The tie between interest rates and tapering is a vital one, and the statement stressed that investors should not view the reduction in purchases as a signal that rate hikes are imminent.

“We don’t think it’s time yet to raise interest rates,” Powell said. “There is still ground to cover” before the Fed reaches its economic goals. He added he wants to see the labor market “heal further, and we have very good reasons to think that will happen as the delta variant declines, which it’s doing now.”

On the current schedule, the reduction in bond purchases will conclude around July 2022. Officials have said they don’t envision rate hikes beginning until tapering is finished, and projections released in September indicate one increase at most coming next year.

Markets, though, have been more aggressive in pricing, at one point indicating as many as three increases next year. That sentiment has cooled off some in recent days as Wall Street anticipated a more dovish Fed as it tries to balance slowing growth and rising inflation.

Inflation has been running at a 30-year high, pushed by a clogged supply chain, high consumer demand and rising wages that have stemmed from a chronic labor shortage. Fed officials maintain that inflation eventually will drift back to their 2% target, but now say that could take longer.