During an interview last Tuesday at the Economic Club of Washington, DC, Fed Chair Jerome Powell stressed that the Fed would be data dependent as they evaluate how to best fight inflation. Powell noted, “If we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more than is priced in.”

The Fed has hiked its benchmark Fed Funds Rate eight times since last March, bringing it to a range of 4.5% to 4.75%. The Fed Funds Rate is the interest rate for overnight borrowing for banks and it is not the same as mortgage rates. When the Fed hikes the Fed Funds Rate, they are trying to slow the economy and curb inflation.

Powell’s remarks followed tough central bank talk from the Bank of England and European Central Bank. Both the BoE and ECB said that the risk of overtightening is dwarfed by the risk of doing too little. They also said that monetary policy needed to continue to show teeth until inflation moves lower to their target.

What’s the bottom line? The central bank commentary came on the heels of the much stronger than expected U.S. Jobs Report for January that was reported by the Bureau of Labor Statistics (BLS) on February 3. However, it is based on a misunderstanding of the data. 

The BLS’ report showed that there were 517,000 jobs created last month, blowing out estimates, but there were large seasonal adjustments, population controls and new benchmarks that greatly impacted the data. On an unadjusted basis, payrolls actually declined by 2.5 million last month. 

In addition, the BLS report was in stark contrast to other data that has been released such as ADP’s Employment Report, which showed only 106,000 job creations in January. Plus, S&P Global’s U.S. Services Purchasing Managers’ Index, which is a monthly survey of senior executive at private sector companies, also showed that “hiring has almost ground to a halt as firms reassess their payroll needs in light of the weaker demand environment.”