Jobs Report February 2022: Live Updates
It is already clear that the Federal Reserve is set to increase interest rates by a quarter point this month, as it seeks to make lending more expensive in an effort to cool the economy.
Central bank chairman Jerome H. Powell said so much this week.
But February’s employment figures, released on Friday, could inform policymakers as they discuss plans to shrink the central bank’s balance sheet (something that could draw extra juice out of the economy) and anticipate future gains. How fast will interest rates rise in the coming months?
Given that growth is widely expected in March, the forecast set out in the summary of economic forecasts that the Fed will issue with its rate decision is likely to take center stage.
Russia’s invasion of Ukraine has made the way forward for the Fed more uncertain, so economic projections will work more roughly than the ironclad plan.
But what happens next also depends on how vibrant the Fed thinks the job market, wage growth and the broader economy are this year, and how much they need a booming labor market to lift prices. Let’s hope.
Unemployment has declined sharply over the past year. When Fed officials last released economic projections in September, they thought the unemployment rate would drop to 3.5 percent — the level before the start of the pandemic — by the end of the year. Economists believe it probably fell to 3.9 percent in February.
As jobs have proved plentiful and workers become more difficult to find, wages have begun to rise rapidly. Economists polled by Bloomberg expect average hourly earnings to climb 5.8 percent in February. This is almost twice the pace that prevailed during the long-running economic expansion.
Even though accelerated wage benefits do not correspond to rapid inflation for many income groups, they have raised the possibility that labor costs could begin to feed into higher prices, setting off an upward spiral. This prospect worries central bankers.
“The big thing we don’t want is for the roots of inflation to become more self-perpetuating,” Mr. Powell said during Congressional testimony this week. “So we are moving forward with our program to raise interest rates and bring inflation under control.”
And that’s why officials may be watching the new data closely as they try to understand how the economy will fare this year.
Fed Governor Chris Waller said late last month that he could support an aggressive start in the Fed’s interest rate if the inflation report and the jobs report for February showed that “the economy is still running very hot”. “
While Mr. Powell rejected the idea of a large March rate hike, Mr. Waller’s emphasis demonstrated how much the central bank is watching this employment report at a critical moment. Mr. Powell had previously made clear that salary data in particular had caught his attention.
But the authorities will have to weigh the strength in the labor market against what is happening in Ukraine. And it’s not clear, at this point, how this could affect the path forward for policy, as the war is raising gas prices but could weigh on consumer spending.
Michael Feroli, chief US economist at JP Morgan, said, “A further rise in energy prices – which has so far been the major channel through which the attack has impacted the US economy – poses a dilemma for monetary policy: high inflation and slow growth.” Growth.” wrote in a research note on Thursday.
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