Unemployment Archives - Page 3 of 3

U.S. Jobs Up. Unemployment Also Up.

Today’s Report

The U.S. jobs report for August is out, with 187,000 jobs added to the economy in August. This is slightly higher than the 170,000 economists had expected. On the other side, unemployment is up slightly, at 3.8%. This is 0.3% higher than economists had predicted. Wages increased slightly, up 0.2% month-over-month, and remain up more than 4% over last year.

About the U.S. Jobs Report

The U.S. jobs report, specifically the nonfarm payroll report, is a critical economic indicator that holds immense significance for both financial markets and policymakers. This report, typically released on the first Friday of each month by the U.S. Bureau of Labor Statistics, provides crucial insights into the health of the labor market in the United States.

The report serves as a barometer of economic health. It offers valuable data on the number of jobs created or lost in the previous month, the unemployment rate, and wage growth. This information helps economists and investors gauge the overall economic performance and can influence their outlook on future economic conditions. If job creation exceeds expectations, it can signal a robust economy, potentially leading to higher consumer spending and business investments.

This report also has a significant impact on financial markets. Stock, bond, and currency markets can experience substantial volatility on the day of the report’s release. Positive job growth can boost investor confidence and lead to stock market gains, while weaker-than-expected data can trigger market sell-offs. Additionally, the Federal Reserve closely monitors the jobs report when making decisions about interest rates and monetary policy, making it a key factor in shaping the direction of these markets in the medium to long term.

In summary, the U.S. jobs report is a vital economic indicator that provides insights into the labor market’s health and has a profound impact on financial markets, influencing investor sentiment, asset prices, and even central bank decisions. It is closely watched by economists, investors, and policymakers alike for its role in shaping economic outlooks and investment strategies.

Fed Chairman Powell Shows His Steady Hand and Firm Conviction at Monetary Conference

In what is his last scheduled public appearance before the post-FOMC statement expected on Sept. 21, Fed Chairman Powell did not say anything that would change expectations of another 75bp Fed Funds rate hike. He instead emphasized the Fed’s commitment to reduce inflation and believes it can be done and at the same time avoid “very high social costs.”

“It is very much our view, and my view, that we need to act now forthrightly, strongly, as we have been doing, and we need to keep at it until the job is done,” Powell said Thursday (Sept. 8) at the 40^th annual Monetary Conference held virtually by the Cato Institute.

The discussion was held after it was known that the Eurozone Central Bank had just raised rates by 75bp. Powell’s talk and the interest rate hike overseas didn’t upset U.S. markets as U.S. Jobless claims had been reported earlier and showed a very strong labor market which helped demonstrate that the Fed’s actions to return inflation to a more acceptable level are not severely hurting business.

The Federal Reserve Chairman continued to reiterate what he has been saying, that the U.S. central bank is focused on bringing down high inflation to prevent it from becoming entrenched as it did in the 1970s. The core theme, most recently heard at the Jackson Hole Economic Symposium, is that he is resolved to return inflation to the Fed’s 2% target.

Mr. Powell said it is critical to prevent households and businesses from ongoing expectations that inflation will rise. He said this is a key lesson taken from the persistent inflation of the 1970s. “The public had really come to think of higher inflation as the norm and to expect it to continue, and that’s what made it so hard to get inflation down in that case,” Powell said. The takeaway for policymakers, he added, is that “the longer inflation remains well above target, the greater the risk the public does begin to see higher inflation as the norm, and that has the capacity to really raise the costs of getting inflation down.”

Speaking the day before at the Economic Outlook and Monetary Policy at The Clearing House and Bank Policy Institute Annual Conference, Fed Vice Chairwoman Lael Brainard, didn’t express a preference on the size of the next increase but underscored the need for rates to rise and stay at levels that would slow economic activity. “We are in this for as long as it takes to get inflation down,” she said.

Fed officials have raised rates this year at the most rapid pace since the early 1980s. The federal funds rate, the percentage banks charge each other for overnight borrowing, rose from near zero in March to a range between 2.25% and 2.5% in July, which is where it sits today.

Take Away

The Fed’s two mandates are to keep inflation at bay and to make sure there are adequate jobs in the U.S. The lessons of the past indicate that expectations of inflation are inflationary themselves. The Fed Chairman and Fed Vice Chairwoman would undermine their goals if they did not talk tough on inflation. With the economy not having sunk into a deep recession, and joblessness at acceptable levels, their actions are likely to match their tough talk.

The stock market typically behaves well when confident that the Fed is fighting inflation and has a steady grasp of what too far is. Overly tight money would dampen business growth.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.federalreserve.gov/newsevents/calendar.htm

https://www.cato.org/events/40th-annual-monetary-conference

https://www.nytimes.com/live/2022/09/08/business/ecb-meeting-inflation-interest-rates

https://www.reuters.com/markets/us/us-weekly-jobless-claims-fall-three-month-low-2022-09-08/