The U.S. economy added 528,000 new jobs last month while the unemployment rate fell to 3.5%, the lowest pre-pandemic, the Bureau of Labor Statistics said Friday. did.
But the economy may still be a concern for many. That could be 9% inflation. Or that Gross Domestic Product (GDP) data has turned negative for his second consecutive quarter.
"It's a mixed bag," said John Lear, chief economist at Morning Consult. “Anything people feel about the economy today is likely to feel different six months from now, especially with widespread unemployment.”
Leah of Economists like the Fed have already increased the chances of rising unemployment due to plans by the Federal Reserve to keep raising interest rates. As part of the so-called double duty, the country's central bank seeks to balance employment and price stability — and currently there is too much demand for labor and consumer prices are not stable enough. I think.
Therefore, the Fed plans to raise its key interest rate for the fifth time this year at its next meeting in September. By making borrowing more expensive to cool demand and try to reverse the price rise, the idea is to keep inflation down to around the 2% desired by the central bank.
As Federal Reserve Chairman Jerome Powell said in a recent press conference:
below potential....inflation back to 2%, If we can get there in the end.”
In an email to clients on Friday, Seema Shah, chief global strategist at Principal Global Investors, said the Fed will push key rates further to 0.75. % said it was likely to increase.
"Not only is the labor market undoubtedly still tight, but wage growth is uncomfortably strong," Shah said, adding that higher wages are great for consumers and their families. suggests that this will lead to increased spending, increased demand, and persistent inflation.
"The Fed is cutting back on its work to create enough slack to ease price pressures," she said.
While all the jobs lost during the pandemic have now been restored, Mr Shah said, "The market is looking at [Friday's] figures as time goes on and the Fed's rate hikes will continue to be significant." We will take it as a reminder to Lee," he added.
"[Interest rates] are over 4% for her. Today's numbers don't raise any doubts," Shah said. The current rate is between 2.25% for her and 2.5% for her.
The Federal Reserve's plans should eventually bring the economy back into balance, but pain in the labor market is likely to come soon, Rea said.
"I think there is an unfortunate trade-off in the short term," he said.
So which parts of the economy will experience the pain? Leer pointed to the technology sector, where layoffs and job freezes are already rampant. He also expects some of the aggressive spending that American consumers, especially high-income earners, have been doing on travel and leisure activities will recede.
As a result, the travel and hospitality sectors, which have been hit hardest by the pandemic, have shown the strongest recovery.
Employment data released on Friday showed the sector added 96,000 new hires in July, while industry employment remained low. is 1.2 million fewer than in February 2020.
Meanwhile, American consumers continue to face economic uncertainty. To adapt, there is ample evidence that many workers take multiple jobs to make ends meet, including driving ride-hailing platforms like Uber. Leer estimates that about 1 in 10 workers must do so to make extra money.
Meanwhile, Chairman Powell said the process to get the economy back on track would likely be painful.
"The process of getting there involves rising interest rates: rising mortgage rates, rising borrowing rates, etc.," he said at a July 27 press conference. Told. "So it's not going to be fun either. But in the end, everyone gets better."