ALBAWABA – Preliminary United States (US) labor market data, issued Saturday, indicated the US jobs market is still running strong through June, with unemployment rates easing and hourly earnings picking up, according to Bloomberg.
Bloomberg’s economists forecast nonfarm payrolls to have increased by 225,000 in June.
According to the Phillips Curve, an economic model for understanding the relationship between the labor market and inflation, the higher the employment rates, the higher inflation is, and vice versa.
The US unemployment rate eased to 3.6 percent while hourly earnings grew 4.2 percent from June 2022. Whereas other labor-related data are expected to come in by Friday, showing marginal responsiveness to the consecutive interest rate hikes, if any.
The US Federal Reserve Board (Fed) has been hiking interest rates since March 2022 in an effort to curb inflation. However, strong jobs market data indicate inflation in the US is not responding well to the rate hikes, nor is the economy.
Market reports since the beginning of 2023 have proven to be sometimes misleading.
June reports showed an increase in unemployment rates in the US, in May, showing signs of responsiveness to the rate hikes. But it soon followed with a rise in employment rates and in wages, in the same month.
In Bloomberg’s terms, this indicates a “resilient economy” and it is both good and bad, depending on the situation and the objectives of the policy.
Forecasts for the US labor market and inflation rates in 2023 have overall been barely accurate, and are often offset by sudden shifts in the political and economic landscape. Not to mention that it takes time for policy measures to reflect on the market.
In the meanwhile, a lot can change, such as the recently announced additional oil production cut by Saudi Arabia, which has bolstered energy prices in Europe and worldwide, fuelling inflation.
Bloomberg’s economists have highlighted that “a key source of past resilience in the economy – the households’ financial buffer – is fast disappearing. As a result, consumer delinquencies and small business bankruptcies are rising fast.”
“Wall Street analysts and economists are increasingly optimistic that the US economy is heading for a soft-landing scenario — a sentiment shared by Fed Chairman Jerome Powell in his comments during a June 28 panel discussion. We disagree,” they told the New York-based news agency.
