On the eve of the May jobs report, CNBC’s Jim Cramer reminded investors of the tricky balancing act the Fed is trying to strike in order to lower inflation without severely damaging the economy.
Investors supported the weak data, making the Fed more inclined to cut interest rates. But Cramer said Wall Street should remember what’s at stake for consumers, especially low-income consumers, when it comes to the data and the Fed’s decision.
“I also want stock prices to go up, but if we cut rates multiple times and inflation comes back, it’s going to be the poor who get hurt,” he said. “That’s why the stakes are so high for the Fed. Unless more people are out of work, Otherwise it can’t afford to cut interest rates, but at the same time it doesn’t want to cause massive layoffs – that’s a difficult position.”
He also noted that it would be unwise to make abstract generalizations about consumers, saying that while most people are feeling the sting of inflation, “poor people feel it much more severely than rich people.” Kramer said it’s difficult for retailers to correctly label consumers as weak or strong because they are familiar with their own customers rather than the wider population.
Cramer went on to say that there is a “huge divide” between consumers, but said many wealthy investors don’t understand enough of the dichotomy.
“Wall Street may support a weak job market so that the Fed can start cutting interest rates, but when the unemployment rate falls below 4% tomorrow, remember what you’re betting on when you throw up your hands in anger,” he said. ”. “[Fed Chair] Jay Powell isn’t worried about those of us with large investment portfolios – he’s worried about the tens of millions of people with next to nothing in the bank.
