On this December 12 episode, we turn to the latest JOLTS report and, more importantly, the decisions and tone emerging from the Federal Open Market Committee. Job openings surprised modestly on the upside, yet were largely unchanged from the previous month. The more telling signal came from the quits rate, a gauge the Federal Reserve treats as a window into the confidence of American workers. Quits have fallen to their lowest level since August 2020, when the economy was still in the teeth of the Covid 19 pandemic. The message is clear enough. Workers are reluctant to walk away from their positions because they doubt that opportunities exist elsewhere.

Stagflation has made it increasingly difficult for the central bank to articulate a coherent strategy. Doves on the committee argue that a weakening labor market should outweigh inflationary concerns, particularly if the recent rise in prices proves transitory. Yet, as we note in this episode, monetary policy offers no free lunch. A steepening yield curve may in fact be the harbinger of near term economic strain and an accelerator of recession risk.