[Washington, 3rd Archyde.com]–The US non-farm payrolls increased by 390,000 from the previous month in May, and wages were still strong, so interest rates were raised by 50 basis points (bp) in a row in June and July. It did not urge the Federal Reserve Board (FRB), which is about to move to, to correct its course. As usual, the US economy seems to have succumbed to the pressure of rising prices and rising interest rates.
Non-farm payrolls, taking into account the March and April revisions, are about 400,000 people each month, even after March, when the Fed started raising interest rates and stock prices fell, raising concerns about a recession. Will continue to increase.
Certainly, the monthly growth rate was lower than 569,000 in January-February this year. The slowdown in employment growth itself is expected by many economists, and given that the unemployment rate is still very low at 3.6% in May, it’s a welcome move for the Fed.
But what economists expected was a much steeper deceleration. Behind the scenes, tech companies have announced layoffs and freezes on new hires, and it has been observed that consumers will start to curb spending as inflation continues, including soaring food and energy prices.
EY-Parthenon Chief Economist Gregory Dako said, “This spring, non-farm payroll growth has slowed, but the imminent recession means nothing more than a’fake’. The US employment level is now less than one million below the record high just before the pandemic of the new coronavirus. “The hearsay that tech companies are experiencing layoffs and hiring freezes is misleading given that overall job listings continue to be close to record highs and layoffs remain at record lows,” he added. ..
The year-on-year rate of increase in average hourly wages has slowed slightly, and the labor force has increased by 330,000. Both sides want the Fed’s policymakers to continue.
However, in the context that inflation is nearly three times the Fed’s target of 2%, we will stick to a 50bp rate hike until we are confident that inflation and wages will slow down. At the time when the Fed is proclaiming itself, the signs that things will settle down are still uncertain.
Fed Vice-Chair Brainard said yesterday that policymakers may choose to slow the pace of rate hikes to 25bp per meeting if inflation eases, but at this stage it is reasonable to suspend rate hikes at the September meeting. He said it was very difficult to find sex. “There is still much more we need to do to reach the 2% inflation target,” he emphasized.
The year-on-year rate of increase in average hourly wages, which was 5.6% in March, has fallen for the third straight month since then, reaching 5.2% in May. Still, it’s higher than the Fed thinks is consistent with a 2% inflation rate. If productivity growth is taken into consideration, wages will rise even more.
“The Fed will not be able to say that things have improved significantly until wage growth slows to nearly 4%,” said Michael Pierce, senior US economist at Capital Economics.
The May Employment Statistics are one of the most important data available to date for the Fed ahead of the next Federal Open Market Committee (FOMC) on June 14-15. Even with this in mind, the predominant forecast at this stage is to raise the policy interest rate by 50bp to 1.25-1.5% in June.
The Fed is also expected to raise rates again in July, unless there is a huge shock.
However, according to Gilbertson, vice president of UKG, which provides attendance management services to small and medium-sized enterprises, hourly wages have shrunk in 10 of the last 11 weeks, and data from each worker show that shift workers You can see how they have been released from the overwork demands seen last year.
Gilbertson explained that this could ease the overheating of the labor market and lead to the Fed’s hopes of lowering job openings-to-applicants without a major layoff. If companies have reduced shift work for hourly workers a bit over the past three months, it will increase the appearance of soft landings in the labor market.
(Reporters by Howard Schneider and Lindsay Dunsmuir)