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US jobs picture mixed as Fed policymakers weigh pivot to rate hikes According to Reuters



© Reuters. FILE PHOTO: A recruitment billboard stands near the auto parts plant SMART Alabama, LLC and its subsidiary Hyundai Motor Co., in Luverne, Alabama, U.S., July 14, 2022. REUTERS/Joshua Schneyer

By Lindsay (NYSE: Dunsmuir .)

(Reuters) – Federal Reserve policymakers were offered only some encouraging signs on Friday as new data showed a strong month of U.S. jobs gains, underlining concerns Their campaign to raise interest rates to reduce high inflation has not really caused difficulties in labor. market or, more broadly, the economy.

The Labor Department said in its closely watched jobs report last month, the United States added 261,000 jobs, well above the 200,000 gain economists expected in a Reuters poll. The data for September was revised higher to show 315,000 jobs created instead of the 263,000 previously reported, but the unemployment rate fell from 3.5% to 3.7%.

“The data is still showing strong positive momentum in the labor market, which has yet to show much of an adjustment in response to tightening monetary policy,” said Rubeela. of the United States at High Frequency Economics.

The US central bank on Wednesday raised interest rates by 75 basis points for its fourth straight meeting, but signaled that it hopes to shift to a smaller borrowing cost increase as soon as its next meeting. in December because it allows the economy to have the fastest time to tighten. of monetary policy for 40 years.

However, Fed Chairman Jerome Powell softened that message with a warning that the rate hikes, while likely smaller, would last long enough that rates would eventually continue higher than policymakers. Policymakers think before and that any discussion of a pause is “very early.” The Fed’s key policy rate is currently in the 3.75%-4.00% range.

Investors in futures contracts tied to the Fed’s benchmark overnight rate are still betting that a 50 basis point hike in December is slightly more likely than another 75 basis point hike. after the jobs report, and although traders are still betting when it climbs to the 5.00% -5.25% range next March, they have reduced their bets as it climbs more than that.

Graphics: The Fed makes another big hike – https://graphics.reuters.com/USA-FED/dwpkdgydxvm/chart.png

DELICIOUS BALANCER ACTION

The Fed is trying to thread the needle into softening the labor market enough to reduce the high vacancy rate and raise wages, which has helped fuel inflation, without causing a spike in unemployment, which will cause them to reduce the throttle sooner than they want.

Continued strong increases also make it difficult for central banks to give up, increasing the likelihood that banks will have to raise borrowing costs to the point that they affect the economy and trigger a recession.

For months, the labor market remained buoyant even as interest rates rose and barely made a dent in the drop in the highest inflation rate in 40 years. By the Fed’s preferred measure, it is running more than three times the central bank’s 2% target.

Friday’s jobs report offered some signs of progress, most notably a slowdown in job growth in some sectors. The household survey portion of the report also showed a sharp drop in employment, while a rise in the unemployment rate indicated easing labor market conditions.

Annual wage growth also appears to have peaked even as average hourly earnings rose more than expected in October monthly to their highest level since July.

That gave weight to a closely watched forward-looking labor cost report last Friday that showed private-sector wage growth slowed significantly in the third quarter, suggests that wage pressures may have peaked.

Graphics: Average Hourly Earnings Growth – https://graphics.reuters.com/USA-FED/JOBS/myvmnzoaapr/chart.png

But the overall pressure remains. Earlier this week, separate government reports showed US job openings unexpectedly rose in September while the number of Americans filing new claims for unemployment benefits unexpectedly fell last week. There are still 1.9 job openings for every unemployed worker.

Wage growth data released on Friday “is still too fast to match the Fed’s 2% inflation target, and with job growth still amazingly resilient… This announcement will not change the Fed’s staunch hawkish attitude,” Michael Pearce said. a senior US economist at Capital Economics.



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