FRANKFURT — U.S. economic growth has remained resilient and the labour market remarkably stable despite successive shocks, but inflation is too high and must be brought back to 2%, New York Federal Reserve President John Williams said on Friday, November 6, hours before the Labor Department publishes the October jobs report — the next piece of evidence that will shape the Federal Reserve's December decision.
"Inflation is absolutely too high. It's been too high for too long," Williams told a European Central Bank conference in Frankfurt, according to Reuters. "It's absolutely essential that we bring inflation back to our 2% target in a timely manner and a sustained basis."
Source: Reuters via SRN News
What is driving prices, in Williams' account
Williams said inflation has soared across the world mostly because the U.S. war on Iran has pushed energy prices higher, and also because soaring investment in artificial intelligence has pushed up costs for some IT-related products and services. In his more detailed remarks, reported by FXStreet and investingLive from the same Reuters coverage, he said the effect of tariffs has largely worked its way through the economy and is now mostly behind us, while energy costs are passing through to inflation broadly as expected — for example through airfares — and artificial intelligence has so far had only a narrow effect on prices, such as in computer chips.
Crucially for the Fed's next steps, Williams said the price shocks are not yet becoming embedded: "Fortunately, we're not seeing that happen so far in terms of inflation expectations, which remain well anchored," he said, adding, "We're seeing wage growth (that is), I think, consistent with our 2% goal." He also said this is an appropriate time to accumulate more information before deciding policy — and offered no explicit guidance on whether the Fed should raise rates in December.
Source: FXStreet (Reuters remarks)
The jobs report that lands at 8:30 a.m. Eastern today
The Labor Department's employment report, due at 8:30 a.m. Eastern on Friday, is expected to show nonfarm payrolls rose by 65,000 jobs in October, according to a Reuters survey of economists, after a gain of only 29,000 in September that was restricted by a calendar quirk related to a late Labor Day holiday. Estimates in the survey ranged from 35,000 to 125,000 jobs. The unemployment rate is expected to have held unchanged at 4.2%, with a high probability it may have slipped to 4.1%, helped by historically low layoffs and a recent jump in job openings.
Source: Reuters via 98.5 The River
Average hourly earnings are forecast to have risen 0.3% in October after edging up 0.1% in September, and to have advanced 2.9% over the twelve months through October. That would be the first year-on-year wage increase below 3% since May 2021, and a slowdown from September's 3.0% — the detail economists say would reinforce the view that the labour market is not a source of inflation. "We have got a jobs market which isn't generating wage growth in any meaningful way. That really should help to dampen medium-term price pressures because the biggest cost input for corporate America is labour," said James Knightley, chief international economist at ING.
A 'job-light expansion': secure if you have work, hard if you are looking
Payroll gains have averaged 68,000 jobs a month this year — well below the pace of economic growth, with gross domestic product increasing at a 3.4% annualised rate in the third quarter on strong consumer spending and aggressive business investment in artificial intelligence. Economists say the economy now needs to create only about 40,000 jobs a month to keep up with growth in the working-age population; that so-called breakeven rate has fallen from roughly 150,000 in 2024 because the labour force is smaller, amid an immigration crackdown and retirements. Some economists argue that shrinking supply of workers is the primary driver of the relatively low unemployment rate.
"Job security remains elevated for workers already employed, while opportunities for job seekers and job switchers have become more limited," said Gregory Daco, chief economist at EY-Parthenon. "More broadly, the economy has shifted toward a job-light expansion, as investment tilts toward technology and firms increasingly meet solid demand by relying more on their existing workforce." Young adults, recent college graduates and some unemployed people are finding it especially difficult to find work, Reuters reported, and household income after adjusting for inflation and taxes fell in September. "The labor market is not too hot, not too cold," said Stephen Stanley, chief US economist at Santander US Capital Markets. "So, the Fed has nothing to worry about when it comes to the labor situation."
The president of the New York Fed is one of the Federal Reserve's most influential voices: he is a permanent voter on the rate-setting Federal Open Market Committee and its vice-chair. When a New York Fed president says inflation is 'absolutely too high' hours before a jobs report, markets read it as a signal about how the committee is weighing its December 8–9 meeting.
What this means for Punjabi and diaspora households — and for truckers
For the large Punjabi and wider South Asian community in the United States, the two halves of Williams' message pull in opposite directions. A stable, solid labour market with historically low layoffs is the good news for workers in warehousing, fulfilment, retail, health care and trucking across California, Washington, New Jersey, Texas and other states — the sectors where Challenger, Gray & Christmas this week counted a record 444,692 October hiring plans, most of them seasonal. The harder news is the cost side: with the Fed holding its benchmark rate at 3.75%–4.00% and Williams insisting inflation must return to 2% 'in a timely manner', borrowing costs for truck loans, mortgages and small-business credit are unlikely to fall soon, and markets currently see a more than 50% chance of a further rate hike in December, with a move by March fully priced in. Energy is the channel truckers feel first: Williams named energy pass-through as a live driver of inflation, the same force that sets diesel prices on the I-5, I-80 and I-95 corridors.
The politics in the background
Reuters reported that disenchantment over the economy, as well as anger over the Middle East conflict now in its ninth month, cost President Donald Trump's Republican Party control of Congress in this week's midterm elections, in which Democrats performed strongly. Economists expect consumer spending and the broader economy to slow in the fourth quarter and into 2027, and most continued to expect the U.S. central bank to raise interest rates in December — though some believed benign wage pressure could limit the number of hikes next year.
What happens next
Three dates now decide the story. First, the October jobs report itself, published at 8:30 a.m. Eastern today: a payroll or wage surprise in either direction would move the December debate immediately. Second, next Tuesday's consumer inflation report for October, which Reuters described as the next clue on the course of monetary policy in early 2027. Third, the Federal Reserve's December 8–9 meeting, at which officials must weigh Williams' warning — inflation 'too high for too long' — against a jobs market that, on his own account, is stable, solid and not generating the wage growth that would entrench inflation.