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Former Treasury Secretary Lawrence Summers said the surge in US job growth last month is “great news” for now but also suggests the Federal Reserve’s interest-rate hikes aren’t working as they used to, raising the danger of a hard landing for the economy.
“We’ve got something of an ‘Energizer bunny’ economy,” Summers said on Bloomberg Television’s Wall Street Week with David Westin, referring to an ad campaign for a super long-lasting battery. But with job growth if anything accelerating, it makes the hard landing risk perhaps “look a little greater,” he said.
Summers spoke after data released Friday that showed US payrolls surged by almost double what economists had expected for September. The 336,000 gain came on top of upward revisions to hiring for the prior two months, though the report also featured a slowing in wage gains.
“You’ve got to recognize that these are good numbers, but I can’t say that they give anything like assurance of a soft landing,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV.
The pickup in hiring comes one and a half years after the Fed kicked off its most aggressive monetary tightening campaign in decades, with more than 5 percentage points of rate hikes. Summers said the economy’s performance suggests some underlying shift in the effectiveness of Fed policy.
