“The pressure on the job market in the United States is truly incredible,” says Boot. “A report came out last Friday that said 200,000 jobs would be added in November, but they’ve gone as high as 260,000.”
According to Boot, this upward trend can be seen more clearly if we look at the full year 2022. “There will then be 370,000 jobs being added on average each month,” he continues. And to achieve the cooling of the US economy that is essentially necessary, it will be necessary to reduce the number of jobs to 100,000 per month. America is therefore in the scenario where interest rates need to be raised further to cool the economy.’
Wrong way
And this while the US economy certainly seemed to be cooling down. The Fed had, among other things, a target for the job market, but according to Boot, that can be redrawn. Though Fed Chief Jerome Powell said he wanted to “see how far he can go with rate hikes.” Boot: ‘He said so and they were cutting statements. Labor demand increased more than expected, but weakened slightly compared to last year and earlier this year.
According to Boot, therefore, it should have been visible to the markets that interest rates would probably rise again. ‘But you hardly see that in the market. Just like the strengthening of the dollar is barely seen. He’s just a little weakened. A rise in interest rates in turn leads to a rise in the dollar, so for some reason the financial market has reacted only weakly. But the message from America is that things remain tense, and this is in line with what we see in Europe.’
Soft landing
Boot thinks the parallel is to investigate a so-called soft landing. This means that central banks do not raise interest rates to an extreme level, but still allow the economy to cool down. Without there being a real downturn, and this is becoming an ever growing question mark.’