Mark Zandi Says Strong Jobs Report Gives Fed ‘Latitude To Raise Rates’ as He Sees ‘Very High Probability’ of December Hike

Moody’s Analytics Chief Economist Mark Zandi said the stronger-than-expected October jobs report gives the Federal Reserve "latitude to raise rates."

Zandi spoke Friday in an interview on CNBC’s "Closing Bell: Overtime". The Bureau of Labor Statistics said the U.S. economy added 165,000 jobs in October, versus the 65,000 economists expected, and the unemployment rate fell to 4.1% compared with a 4.2% forecast. The host noted that expectations for a December rate hike have risen to nearly 80%.

Strong Jobs Report Revives December Rate Hike Bets

Zandi called it "a really solid report," but said "a lot of noise" in it overstates the labor market’s strength. Because last month’s job numbers were "very weak," he said, "the reality is probably somewhere in between."

Inflation "still remains elevated," he said, though core CPI, due next week, looks like it will decelerate. Fed members are "still very nervous about the high rates of inflation," and with this jobs number, "they’ve got latitude to raise rates," said Zandi. "I think there’s very high probability they hike in December," he said.

Housing Freeze, Market Weakness And AI Inflation

Zandi said he is "less sure" about a rate hike beyond December, because higher interest rates and a weaker stock market should soften the labor market and the economy, and inflation should come down as long as the Iran war "goes in the right direction." "So this might be one more rate hike and that’s the end of it," he said, adding that there could be "another rate hike or two in 2027" if not. He said fixed mortgage rates over 7% have "really done a number on the housing market," which was already in a "deep freeze" and is now "kind of frozen solid," and that the S&P has "essentially gone nowhere" for six months, which should take "a little bit of steam out of wealth and consumer spending."

Asked what a slowdown in data center construction would mean for the economy, Zandi said the AI boom is currently juicing growth through spending and higher stock prices, and also adds to inflation through electricity, chips and consumer electronics. If AI cools off, he said, the Fed may not need the same number of rate hikes, and a cool-off "might be the best thing for the economy and for the AI industry" because the industry feels like it is "getting ahead of itself."

Zandi and JPMorgan Warn of Consumer and Housing Strain

Zandi’s housing remarks follow comments he made in September on the Inside Economics podcast. He challenged Visa Inc. (NYSE: V) Chief Economist Wayne Best, who forecast 2.2% real GDP growth for 2026 and cited consumer "resilience." Zandi said Wall Street was "too optimistic" about the consumer, pointing to flat real wage growth, a lower savings rate and rising interest rates.

In October, John Sim, J.P. Morgan’s Head of Securitized Products Research, said on the bank’s "All Into Account" podcast that the housing market is "frozen." He said the cost for a renter to buy a median-priced home is about 50% of median income, versus 20% to 25% for existing mortgage holders locked into lower rates. About 75% of borrowers have mortgage rates below 5%, he said.

Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.

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