Global Courant
WASHINGTON — Another solid month of hiring in the United States is expected to be reported on Friday, an outcome that suggests a recession is not imminent but could make it more difficult for the Federal Reserve to succeed in its drive to cool the economy and curb high inflation.
Employers are expected to add 205,000 jobs by June, according to economists polled by data provider FactSet. While it would be below recent monthly gains, that would represent a healthy increase and reflect a historically high number of advertised vacancies.
A continuation of robust hiring would underscore the surprising resilience of the economy at a time when the Fed has raised its key interest rate by as much as 5 percentage points – the fastest pace of rate hikes in four decades. Those increases have made mortgages, car loans and other forms of borrowing significantly more expensive. Yet consumers are still increasing their spending, albeit modestly, prompting some companies to hire and expand.
Economists have predicted that the unemployment rate fell from 3.7% to 3.6% last month, close to the lowest level in five decades.
Even modest job growth for June would all but increase the likelihood that the Fed will resume rate hikes at its next meeting later this month. Before pausing last month, the central bank had raised its benchmark interest rate ten times in a row. Chairman Jerome Powell said at the time that the Fed had skipped a rate hike so that policymakers could take stock of the impact of the sharply higher borrowing costs on the economy.
When they met in June, Fed policymakers indicated they were targeting two more quarter-point rate hikes before the end of the year. Previously, Fed watchers had expected officials to announce only one more rate hike this year. Their updated projections reflected the belief of many Fed officials that they need to do more to overcome inflation, which has fallen sharply since its peak but is still well above the Fed’s 2% target at 4%.
On Thursday, Lorie Logan, president of the Federal Reserve Bank of Dallas, suggested that continued high inflation and “a stronger-than-expected labor market” mean that borrowing costs will have to go even higher.
“I remain very concerned about whether inflation will return to target in a sustainable and timely manner,” Logan said in his remarks at a conference of central banks in New York. “And I think more restrictive monetary policy will be needed.”
Other Fed officials look for signs of what they describe as a better balance in the labor market, meaning that the supply and demand of workers are becoming more equal. After the economy emerged from the pandemic, the number of available jobs rose above 10 million – the highest level ever. That burgeoning demand for labor coincided with millions of Americans dropping out of work to retire, avoid COVID, care for family members or prepare for new careers.
As companies struggled to fill countless vacancies, many offered significantly higher wages and benefits to attract or retain employees. Fed officials are still concerned that rising wage levels will keep inflation chronically high once companies pass on their rising labor costs by raising prices.
Some progress has been made towards a better match between supply and demand: about 2 million people have started looking for work in the last seven months, and most of them have found a job. As the supply of workers has improved, companies say more people are applying for jobs. And the number of job openings fell in May, a sign that demand for workers is gradually cooling, although it remains higher than in pre-pandemic times.
Another sign of a possible slowdown in the labor market is that fewer Americans are quitting their jobs to look for a new job. Quitting had skyrocketed after the pandemic. Millions of Americans were looking for more meaningful or better paying jobs, increasing pressure on companies to raise wages to retain their workers. In May, about 4 million Americans quit their jobs, up from the April figure but below the peak of 4.5 million reached last year.
“As economic uncertainty has increased, workers are slightly less likely to change jobs, which could indicate that the job market will slow down,” said Luke Pardue, an economist at Gusto, which makes payroll software for small and medium-sized businesses. enterprises.
Still, other recent reports suggest the economy has continued to grow and demand for workers remains high. On Thursday, a survey of service providers — including banks, restaurants and shipping companies — found that the industry grew at healthy growth in June and that service companies accelerated their hiring compared to May.
Also on Thursday, payroll provider ADP reported an explosive increase in hiring by private employers in June: 497,000 additional jobs. However, ADP’s hiring figures often differ from official government data.
“Economists and analysts have time and again expected a sharp slowdown in job numbers, which just hasn’t happened in the last six months,” Pardue said. “Despite many calls for a near-term recession, the labor market remains surprisingly resilient.”
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