Washington/Berlin (Archyde.com) – The US labor market is booming even following the central bank’s interest rate staccato, making further major monetary policy steps by the Fed likely.
Last month, 372,000 new jobs were created, as the government announced in Washington on Friday. Economists polled by Archyde.com had only expected 268,000. The separately determined unemployment rate remained at the previous month’s value of 3.6 percent, which corresponds to full employment. The Fed wants to fight escalating inflation and is accepting that the economy and thus the job market will cool down. US currency banker Raphael Bostic said he sees the way clear for another sharp rate hike of three-quarters of a percentage point at the end of July.
The Fed can dare to do so without having to fear long-term damage to the economy, said the head of the Atlanta Fed district. At the same time, the robust job data increased investors’ concerns regarding interest rates. The stock markets gave up some of their price gains, while US futures increased their losses. At the same time, the exchange rate of the euro threatened to slip below the one dollar mark for the first time since 2002.
June figures released by the US Department of Labor also show that wage growth remains strong at 5.1 percent. “However, the increase in wages is not enough to compensate for the inflation rate of 8.6 percent recently,” says VP Bank chief economist Thomas Gitzel. In real terms, a wage minus remains. “For this very reason, no major jumps are to be expected in US consumption at the moment. US citizens will have to tighten their belts despite the good development on the labor market.”
All in all, today’s job market report is certainly not what Brsians were hoping for,” said portfolio manager Thomas Altmann from asset manager QC Partners force further speedy tightening.
NOTHING TO FEEL OF RECESSION
In view of the strong job market and the high inflation at the same time, the Fed had recently raised the key interest rate more sharply than at any time since 1994. It resolved an increase of 0.75 percentage points to a range of 1.50 to 1.75 percent. It was the third increase this year. For the meeting at the end of the month, monetary authorities are eyeing another one, as inflation was last seen at 8.6 percent, well above its 2.0 percent target. At the end of July, interest rates might be up 0.5 or 0.75 percentage points, especially as next week’s inflation rate is expected to rise to 8.7 percent in June.
Fed Chairman Jerome Powell has not fundamentally ruled out a rate hike by a full percentage point. Recently, investors on the US stock markets have been increasingly concerned that aggressive interest rate hikes might stall the economy.
According to the economists at Commerzbank, however, there is still no sign of an impending recession. They point out that employment has increased across the board across the board. Overall, the increase in jobs over the past four months has been relatively constant at just under 400,000. “This is striking in that employment has now almost reached the level before the pandemic once more, there are only 524,000 jobs missing,” said Commerzbank economists Christoph Balz and Bernd Weidensteiner. It should therefore become increasingly difficult to fill vacancies. In fact, there are 11.3 million job vacancies for the 5.9 million unemployed.
(Report by: Lucia Mutikani, Ann Saphir and Lindsay Dunsmuir, written by Reinhard Becker, Anika Ross, collaboration Klaus Lauer, edited by Jrn Poltz. If you have any questions, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)
