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The Fed is 'going to end up killing the labor market,' economist says

Brian Sozzi
·Executive Editor
Updated 2 min read
In this article:

The Federal Reserve is being too aggressive with its stance on interest rates and could send the job market into a tailspin, warns MKM Partners chief economist Michael Darda.

"I think households here are also caught in the Fed's crosshairs because the tightening is likely to keep going until it kills the labor market," Darda said on Yahoo Finance Live (video above). "They [the Fed] will kill inflation, but they are going to end up killing the labor market."

Cracks in the labor market are piling up as the economy slows amid determined Fed rate hikes.

WASHINGTON, DC - JUNE 15: U.S. Federal Reserve Board Chairman Jerome Powell speaks during a news conference following a meeting of the Federal Open Market Committee (FOMC) at the headquarters of the Federal Reserve on June 15, 2022 in Washington, DC. Powell announced that the Federal Reserve is raising interest rates by three-quarters of a percentage point, the highest rate hike in 28 years. (Photo by Drew Angerer/Getty Images)
U.S. Federal Reserve Board Chairman Jerome Powell speaks during a news conference following a meeting of the Federal Open Market Committee (FOMC) at the headquarters of the Federal Reserve on June 15, 2022 in Washington, DC. (Photo by Drew Angerer/Getty Images) (Drew Angerer via Getty Images)

This week brought reports of Intel laying off off thousands of workers amid a slowdown in PC sales. (Intel declined to comment to Yahoo Finance on the matter.) Beyond Meat is cutting 19% of its workforce. Meta is also reportedly culling workers, and other tech companies began cuts or hiring freezes earlier this year.

U.S. based employers announced 29,989 job cuts in September, a 46.4% increase from August, according to fresh data from outplacement firm Challenger, Gray & Christmas. The figure is a stunning 67.6% higher from the same month last year.

September marked the fifth time this year that job cuts were higher in 2022 than in the same month a year ago, the data showed.

Darda warned U.S. workers need to be prepared for the job related news flow to worsen moving forward.

"The labor market has been very strong and resilient," Darda explained. "That has been the saving grace. But this inflationary backdrop has certainly been an irritant to households. We can see that in a lot of weak confidence data. So far that hasn't been enough to stop the economy in its tracks. But we have the Fed tightening very aggressively, and that will hit the economy with a lag."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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