Jobs Report Shows 428,000 Job Gain: Live Updates




Target Federal Funds Rate

federal funds

target rate

Target Federal Funds Rate

federal funds

target rate

federal funds

target rate


The Federal Reserve is trying to cool down the red-hot US labor market. But it could be months before those efforts begin to bear fruit.

The central bank said on Wednesday it would raise interest rates by half a percentage point, the biggest increase in more than two decades, and start reducing its bond holdings in a bid to rein in inflation. In a press conference following the announcement, Fed Chairman Jerome H. Powell cited the labor market, and in particular the record number of job openings relative to the number of unemployed workers, as a reason why policymakers had become more aggressive in recent years. months.

“You can see that the labor market is unbalanced — you can see that there is a labor shortage,” Powell said.

Higher interest rates should, in theory, result in lower demand from both consumers and businesses, leading businesses to post fewer jobs and hire fewer workers. Mr Powell hopes that will allow the labor market to rebalance without a rise in the unemployment rate.

But those changes won’t be apparent overnight. Interest rates take time to affect the economy, and there are reasons to think the process could take longer than usual this time. Consumers collectively have trillions of dollars in money saved during the pandemic, and many seem eager to spend it on long-overdue activities like travel. That could mitigate the impact of Fed policies, said Michelle Meyer, chief US economist at Mastercard.

“The protection available to the consumer is substantial, which means it may take longer to see the impact” of rate increases, he said. “The more resilient the economy and the stronger it is, the higher the Fed will have to take interest rates to see reduced demand depress inflation.”

Still, interest rates will eventually have an effect, Meyer said. One of the first places the Fed’s actions are likely to appear is the housing market. Mortgage rates have risen significantly, causing a sharp drop in new mortgage applications, and there are signs that sales have started to slow. Construction activity, and construction jobs, won’t respond as quickly, in part due to a long-standing shortage of homes for sale, but over time, construction is likely to slow as well.

Manufacturing is also likely to feel the effect of higher rates. But the signs could be hard to interpret: Many economists were already expecting a slowdown in manufacturing this year as the pandemic recedes and consumers return to spending more on services than goods.

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