CNBC's Jim Cramer asserted Wednesday that the Federal Reserve is not done tightening, even as inflation seems to be on the decline because the consumer price index is no longer so scorching hot.
"Unfortunately, even with inflation cooling, the Fed has no choice but to keep tightening, if only to offset the tidal wave of inflation caused by all the government spending that's about to steamroll this economy," he said.
Cramer listed three factors that might indicate the Fed hasn't finished tightening. First, he said the CPI's improvement is mainly due to a decline in used car prices, and according to Cramer, the CPI might start heading "in the wrong direction" if those prices start to go back up. He also noted housing data, which plays a major role in inflation, is not even included in the CPI, and home prices are up 40% since 2019. Cramer also highlighted the tight labor market he thinks is currently making inflation difficult to manage.
"We need to stop confusing any given index with the tight labor market that makes our current bout of inflation so intractable," Cramer said. "There are still way too many jobs chasing far too few employees."
Cramer said he's worried more and more jobs will be created without enough trained workers to fill them, especially in factories, which he predicted will be needed as the battery, solar, wind and semiconductor manufacturing industries expand. The Fed can pride itself on some industries' prices going lower, such as cookies, fish, apparel and secondhand cars, Cramer said, but he added he's continually worried about the labor market.
"The number of jobs being created right now by federal money is so gigantic that it's almost impossible to imagine where we'll find people to fill these positions, at least at these prices if not much, much higher," Cramer said. "I can tell you this, though: They're going to be paid a heck of a lot more than anyone expects, and I wouldn't be surprised if the general contractors don't even hazard to bid for these jobs because they'll lose too much money."
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