Slower pace of US jobs growth offers some relief for the Fed


Slower monthly job growth in the US and a swelling workforce have provided some relief for the Federal Reserve as it looks for signs of a cooling economy, but economists warn that a third consecutive 0.75 percentage point rate hike later this month cannot be ruled out.

The world’s largest economy added 315,000 positions in August, in line with economists’ expectations. That compares with the downwardly revised 526,000 jobs created in July, which have left the unemployment rate at a multi-decade low. The number of jobs added in June was also revised from almost 400,000 to 293,000.

Despite the increase in August, the unemployment rate rose by 0.2 percentage point to 3.7 percent. As the workforce grew by 786,000, the number of people seeking work but still unemployed rose by 344,000. As a result, the employment rate, which tracks the proportion of Americans who are employed or looking for a job, rose to 62.4 percent, but is still hovering below pre-coronavirus levels.

The data, released Friday by the Bureau of Labor Statistics, underline that the labor market remains robust even as the Fed has embarked on its most aggressive monetary tightening since the early 1980s.

“I think the Fed will appreciate the fact that employment rates have increased, but the bigger problem for them remains that 300,000 jobs a month is still way too fast,” said Ajay Rajadhyaksha, global research chair at Barclays.

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Faced with the highest inflation rate in four decades, the central bank is debating how high to raise interest rates and how long to stay at levels that actively curtail economic activity.

In four months, the federal funds rate target range has risen from near zero to between 2.25 and 2.50 percent, and many officials believe that at some point, the interest rate must rise closer to or above 4 percent to keep inflation. successfully mastered.

Now the Fed faces the question of whether to extend its 0.75 percentage point rate hike series for yet another meeting later this month, or whether to slow down and make a half-point adjustment during the meeting. from Sept.

“Obviously they have a lot of work to do,” said Robert Dent, senior US economist at Nomura. “[But] I think they know they can’t go up 75 basis points forever.”

All eyes are on the next inflation report due later this month, but after the Fed enters its planned “blackout” period, where it has been limited in its public commentary.

Dent said the report is “ultimately the main input to the Fed right now for their short-term talks”.

Most economists believe a 0.75 percentage point rate hike in September is firmly on the table, especially in light of Chairman Jay Powell’s extremely aggressive message last month that the central bank would “hold on” until it has price stability. recovered.

Powell also admitted that the process would likely bring an ongoing period of lower growth, higher unemployment and “some pain” for households and businesses.

For Veronica Clark, an economist at Citigroup, a third consecutive 0.75 percentage point rise later this month said it reinforces Powell’s message and underscores the Fed’s commitment to eradicate price pressures.

“There is no clear sign, especially in the inflation data and not in the labor market data, to tell you that we will be working at a consistently lower underlying inflation rate,” she said. “In that sense, you just have to be more aggressive and if you’re given the opportunity to do another… [0.75 percentage point move]why not take it?”

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Economists have expected monthly job growth to slow, especially as most of the losses from the pandemic have been recovered. But employers still struggle with widespread labor shortages, meaning they must compete fiercely to retain employees and hire new ones.

Data released earlier this week shows that there are still around two job openings per unemployed worker, suggesting some softening in the extremely tight labor market.

As such, wages have risen sharply across the country, raising concerns about a feedback loop that will force companies to charge more for their products and services to cover these costs, driving workers to demand even higher wages.

Average hourly wages rose again in August, with a monthly wage increase of 0.3 percent or 5.2 percent on an annual basis.

The number of jobs in professional and business services increased by 68,000 and employment in care by 48,000. Jobs in the retail and manufacturing industries also rose, while those in the leisure and hospitality sectors did not change much. The same was true for the construction and transport sector.

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In financial markets, yields on the two-year US Treasury bill, which is sensitive to interest rate expectations, fell 0.11 percentage points to 3.41 percent after trading about 3.48 percent just before the jobs data was released. The S&P 500 gave up gains from earlier in the session to remain roughly flat during lunchtime trading in New York.

Additional reporting by Kate Duguid in New York

The Valley Voice
The Valley Voice
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.


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