- The Fed's rate hikes have had "zero impact" on the job market, Barry Sternlicht said.
- The real estate mogul pointed to job growth in rate-sensitive areas of the economy.
- Job losses in the services sector could push the US into a swift recession, he warned.
The Federal Reserve's aggressive inflation fight hasn't worked to cool off the job market, and the central bank risks sparking a "serious" downturn for US consumers, according to real estate billionaire investor Barry Sternlicht.
The Starwood Capital Group CEO pointed to the Fed's steep rate hikes in 2022 and 2023, which tightened financial conditions and helped lower high prices in the economy.
Sternlicht said high interest rates haven't loosened the job market even in the most rate-sensitive areas like construction. That growth poses a problem for central bankers, who are looking for more evidence of a cooling economy before easing monetary policy.
Jobs in the healthcare industry have climbed 1.4 million since March 2022, the month the Fed first began raising interest rates. Jobs in construction, meanwhile, grew by half a million in that time frame, according to data from the Bureau of Labor Statistics.
"He's had zero impact," Sternlicht said of Fed Chair Jerome Powell, speaking to CNBC on Wednesday. "He's not getting layoffs in the parts of the market that are the most sensitive."
In aggregate, job growth has cooled since the hiring spree in 2023. The unemployment rate has ticked higher over the past year, clocking in at 3.9% in April, but is still at the lowest level in decades.
Job cut announcements also spiked at the start of the year, with plans to lay off working rising 136% over the month of January, according to a report from Challenger, Gray & Christmas.
The Fed keeping interest rates higher for longer risks further weakening the job market. If job losses begin to hit the services sector, that could easily push the US into a hard landing, given it's outsized impact on the economy, Sternlicht warned.
71% of non-farm employees in the US work in the services sector, according to the latest jobs report.
"If he hits that, he creates a great recession. If he's going to knock those jobs out, which is a big category, he's going to have to have a serious consumer recession, which I don't think he can stop," Sternlicht said, adding he foresaw "aggressive" Fed rate cuts.
Other Wall Street forecasters have been warning of the risk of recession, especially as interest rates look poised to stay higher for longer. Rates are hovering at their highest levels since 2001. Meanwhile, the New York Fed sees a 52% chance the US could enter a recession within the next 12 months.
