What a hot job market means for inflation

The US job market is still piping hot. That’s raising questions about how fast inflation will continue to cool.

The US job market is still piping hot. That’s raising questions about how fast inflation will continue to cool. The economy added a staggering 254,000 jobs in September, according to Friday data from the Bureau of Labor Statistics. That blew past expectations of 140,000 job gains from economists polled by FactSet, and marked a jump from August’s upwardly revised 159,000 tally. The unemployment rate edged lower to 4.1% from 4.2%. That comes after the Federal Reserve last month cut interest rates by a jumbo half-point, signaling that it is turning its attention from tamping down inflation to keeping the job market steady. Following the strong labor report, traders raised their bets for a quarter-point cut in November, as opposed to a more drastic half-point cut, according to the CME FedWatch Tool. Investors say the better-than-expected jobs report suggests that a soft landing, or a scenario in which inflation is tamed without a recession, is in reach. But some warn that a still-strong labor market could make it more difficult for inflation to continue cooling. That’s because a low unemployment rate and hot job market underline a strong American consumer, whose spending helps drive up the cost of goods and services. “With Fed easing now underway, recession risk has collapsed. Markets will need to keep a closer eye on inflation as, now, there are policy risks on both sides of the economy,” wrote Seema Shah, chief global strategist at Principal Asset Management. Investors will get their next look at inflation through two key reports on deck this week. The Bureau of Labor Statistics releases the September Consumer Price Index on Thursday, with wholesale inflation figures following a day later.