EconomySlower pace of US jobs growth offers some relief...

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


Slower monthly US jobs growth and a swelling labour force offered some relief to the Federal Reserve as it looks for signs that the economy is cooling, but economists warn a third consecutive 0.75 percentage point interest rate increase later this month cannot be ruled out.

The worldโ€™s largest economy added 315,000 positions in August, in line with economistsโ€™ expectations. That compares to the downwardly revised 526,000 jobs created in July, which had helped to anchor the unemployment rate at a multi-decade low. The number of jobs added in June was also revised down to 293,000, from almost 400,000.

Despite Augustโ€™s gains, the jobless rate edged up 0.2 percentage points to 3.7 per cent. As the size of the labour force swelled by 786,000, the number of people looking for work but still unemployed rose by 344,000. The labour force participation rate, which tracks the share of Americans either employed or seeking a job, ticked higher as a result to 62.4 per cent, but still hovers below its pre-coronavirus pandemic level.

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

โ€œI do think the Fed will like the fact that the labour force participation rate has gone up, but the bigger issue for them remains that 300,000 jobs a month is still way too fast,โ€ said Ajay Rajadhyaksha, global chair of research at Barclays.

Confronted by the most elevated levels of inflation in four decades, the central bank is debating how high to raise interest rates and for how long to keep them at a level that actively restrains economic activity.

In four months, the target range of the federal funds rate has jumped from near zero to between 2.25 per cent and 2.50 per cent, and many officials think rates need to rise closer to or above 4 per cent at some point to successfully tame inflation.

Now, the Fed is faced with the question of whether to extend its string of 0.75 percentage point rate rises for yet another meeting later this month or shift to a slower pace and implement a half-point adjustment at its September meeting.

โ€œClearly they have a lot of work to do ahead of them,โ€ said Robert Dent, senior US economist at Nomura. โ€œ[But] I think they know that they canโ€™t keep hiking by 75 basis points forever.โ€

All eyes are on the next inflation report due out later this month, but after the Fed enters its scheduled โ€œblackoutโ€ period where it is limited in its public commentary.

Dent said that report is โ€œultimately the most important input for the Fed at this point for their near-term discussionsโ€.

Most economists believe a 0.75 percentage point rate rise in September is firmly on the table, especially in light of the extremely hawkish message sent from chair Jay Powell last month that the central bank would โ€œkeep at itโ€ until it has restored price stability.

Powell also admitted that the process would probably involve a sustained period of lower growth, higher unemployment and โ€œsome painโ€ for households and businesses.

For Veronica Clark, an economist at Citigroup, said a third consecutive 0.75 percentage point increase later this month would help to ratify Powellโ€™s message and underscore the Fedโ€™s commitment to stamping out price pressures.

โ€œThereโ€™s no obvious sign, certainly not in the inflation data and not in the labour market data, to tell you that weโ€™re going to be running at a consistently slower underlying pace of inflation,โ€ she said. โ€œIn that sense, you do need to just be more aggressive and if youโ€™re given the option to again do a [0.75 percentage point move], why not take it?โ€

Economists have expected the rate of monthly jobs growth to slow, especially as most of the losses brought about due to the pandemic have been recouped. But employers are still grappling with widespread labour shortages, meaning they are having to compete fiercely to retain workers and hire new ones.

Data released earlier this week indicate there are still about two vacancies per unemployed worker, indicating little softening of the extremely tight labour market.

As such, wages nationwide have risen sharply, sparking concerns of a feedback loop whereby companies are forced to charge more for their products and services to cover these expenses, leading workers to demand even higher pay.

Average hourly earnings rose again in August, with wages up 0.3 per cent for the month, or 5.2 per cent on an annual basis.

The number of professional and business services jobs rose by 68,000 and employment in the healthcare industry increased by 48,000. Retail and manufacturing jobs also ticked up, while those for the leisure and hospitality sector showed little change. The same was true for the construction and transportation sectors.

In financial markets, the yield on the two-year US Treasury note, which is sensitive to interest rate expectations, was down 0.13 percentage points below 3.4 per cent in late afternoon trading in New York on Friday, having traded around 3.48 per cent just before the release of the jobs data in the morning. The S&P 500 closed 1.1 per cent lower, reversing a gain of as much as 1.3 per cent earlier in the session.

Additional reporting by Kate Duguid in New York



Original Source Link

Latest News

A better way to treat youth mental health

With a shortage of pediatric psychiatrists, we need a new model to support pediatricians and patients. After founding my...

Trump-Backed Crypto Venture To Extend Token Sales

Este artรญculo tambiรฉn estรก disponible en espaรฑol. The Financial Times reported on Monday that World Liberty Financial (WLF), the...

US stocks climb as investors parse Donald Trumpโ€™s executive orders

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington...

Trump Says He Ended the โ€˜EV Mandate.โ€™ What Does That Mean?

From the campaign trail, President Donald Trump was consistent: He would โ€œend the electric vehicle mandate.โ€ So itโ€™s...

Justice Jackson Did Not Wear A Dissent Collar To The Inauguration. She Apparently Wore A Talisman To Ward Off Evil.

As I watched the Justices enter the Capitol Rotunda, I noticed that Justice Jackson was wearing a distinctive...

Must Read

The FTC Suing John Deere Is a Tipping Point for Right-to-Repair

Today, the US Federal Trade Commission filed a...

$3.6M Four Seasons condo leads latest Top of the Market

Check out the most expensive recent home sales...
- Advertisement -

You might also likeRELATED
Recommended to you