As we know, Google (GOOG, GOOGL), Microsoft (MSFT), Amazon (AMZN) and other big tech companies have laid off more than 70,000 employees so far in the last year, and that doesn’t look like the end of the story.

Zoom — which took off as employers quickly pivoted to remote meetings during the Covid-19 pandemic, announced plans on Tuesday to cut 1,300 employees—becoming the latest U.S. company to implement job cuts as recession fears continue into 2023. Atlanta-based cybersecurity company Secureworks announced in a Securities and Exchange Commission filing it will cut 9% of its staff (estimated to affect roughly 225 of its nearly 2,500 employees.

On the other hand, according to the latest Nonfarm Payrolls report, the U.S. employers added 517,000 jobs on a seasonally adjusted basis, posting an increase from 260,000 in December. The unemployment rate fell to 3.4%, posting the lowest figure since 1969.

So, let’s drill down, what is really happening here. It looks like America is shedding many high paid skilled jobs, replacing them with a plethora of low-key waged or low salaried jobs. There is no other way how to interpret these two numbers in their integrity.

This will represent a challenging situation for the Fed going forward. On one hand, the U.S. central bank is not obligated to follow – let alone react – to individual employment situations within U.S. companies. However, the Fed does take into account the Labor Department job reports. So it turns out that the perplexity of the seemingly contradicting news is none of the Fed’s business. Yet, the Fed certainly understands what’s been going on, and must take this situation seriously unless it wants to further aggravate it by future robust rate hikes.

The underlying discrepancy suggests the future rate hike expectations are not justified. Investors may be willing to monitor some aggregated inflation expectation indices to balance and hedge their existing portfolios. Of them, one of the most accessible and straightforward is the ICE U.S. Dollar Inflation Expectations Index Family. According to their Website, IBA calculates the implied market inflation expectations by sourcing price/yield data from the U.S. Treasury Inflation Protected Securities (TIPS), Treasury Bills, Notes and Bonds, and the inflation linked swaps markets. By combining both Treasury market data (TIPS real yield relative to like maturity nominal Bill, Notes and Bonds yields) with inflation swaps pricing data, IBA sources input from the most liquid inflation-linked markets. From these data sources, IBA creates a projection of the future path of the Consumer Price Index, CPI, from which forward implied inflation expectations can be calculated; for example, the forward 5Yr inflation expectation in one years’ time can be derived by referencing the projected CPI levels at one and 6Yrs after the latest published CPI.