![]() Higher rates typically take time to affect job growth and inflation. The Fed has increased its key rate by a substantial 5 percentage points since March 2022, to about 5.1 percent, the highest level in 16 years. This would allow them time to assess how their previous rate hikes have affected the inflation pressures underlying the economy. Top Fed officials signaled earlier this week that they plan to forgo a rate increase at their June 13-14 meeting. “If the economy remains too hot to meaningfully slow inflation, the Fed will simply raise rates higher, still a path towards a downturn.” What does all this mean for the Fed’s approach to interest rates? “The continued strength in employment pushes back the start of a prospective recession but does not eliminate that likelihood,” said Kathy Bostjancic, chief economist at Nationwide. Still, Chair Jerome Powell has held out hope that the central bank can significantly slow price growth without causing a deep recession. The Fed has projected that its rate hikes will weaken the economy and raise unemployment, as well as lower inflation. The Fed’s rate increases have elevated the costs of mortgages, auto loans, credit card use and business borrowing. READ MORE: Some lawmakers propose loosening child labor laws to fill worker shortageĪnd the threat of further interest rate hikes by the Fed, in its continuing drive to fight inflation, always looms. That indicates that lower-income consumers, in particular, are feeling squeezed by high inflation. Sales at several retail companies, including discount chain Dollar General and department store Macy’s, have weakened. The proportion of Americans who are struggling to stay current on their credit card and auto loan debt rose in the first three months of this year, according to the Federal Reserve Bank of New York. A measure of factory activity showed that manufacturing has contracted for seven straight months.Īnd consumers are showing signs of straining to keep up with higher prices. Some cracks in the economy’s foundations have emerged. Does that mean the economy is in the clear? More hiring translates into more Americans earning paychecks, a trend that suggests that consumer spending - the principal driver of U.S. “As long as the economy continues to produce above 200,000 jobs per month, this economy simply is not going to slip into recession,” said Joe Brusuelas, chief economist at consulting firm RSM. ![]() READ MORE: Britain’s Treasury chief says that recession may be necessary to lower inflation A recession, if one occurs, is likely further away than many economists had previously thought. The strong, steady job growth of the past several months shows that the economy remains in solid shape despite the Fed’s interest rate hikes, which have made borrowing much costlier for businesses and consumers. This suggested that not everyone who lost jobs in recent high-profile layoffs by banks, tech firms and media companies has found new work. That’s down from gangbusters gains of nearly 6 percent a year ago.Īnd the rise in the unemployment rate partly reflected higher layoffs. Average hourly pay increased 4.3 percent from a year earlier. ![]() Hourly wage growth also dipped in May, evidence that many businesses feel less pressure to dangle higher pay to find and keep workers. The average work week is down from 34.6 hours a year ago. It means that, on average, weekly paychecks will be slightly smaller. ![]() That is a seemingly small drop, but economists said it’s equivalent to cutting several hundred thousand jobs. Yet there are signs that hiring is cooling from the super-heated levels of the past two years.įor one thing, the length of the average work week declined, to 34.3 hours from 34.4 in April. So the overall picture is an encouraging one. In May, employers added the most jobs since January. (The government compiles the unemployment data using a different survey than the one used to calculate job gains, and the two surveys sometimes conflict.) Is the labor market as strong as the gain of 339,000 jobs suggests? It’s the highest unemployment rate since October. Notably, the unemployment rate rose to 3.7 percent, from a five-decade low of 3.4 percent in April. Yet there were some mixed messages in the May figures. Overall, the report painted a mostly encouraging picture of the job market. Many industries, from construction to restaurants to health care, are still adding jobs to keep up with consumer demand and restore their workforces to pre-pandemic levels. WASHINGTON (AP) - The nation’s employers stepped up their hiring in May, adding a robust 339,000 jobs, well above expectations and evidence of enduring strength in an economy that the Federal Reserve is desperately trying to cool.įriday’s report from the government reflected the job market’s resilience after more than a year of aggressive interest rate increases by the Fed.
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