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Tuesday, July 23, 2024

Recent Jobs Data Could be What The Fed is Looking For

The latest jobs data released on July 5th shows a mixed but encouraging picture for the Federal Reserve.

Recent Jobs Data Shows Encouraging Picture

Non-Farm Payrolls for June came in at 206,000, slightly above the consensus estimate of 190,000 but lower than the previous month’s 218,000. This moderate job growth suggests a cooling labor market. This would align with the Fed’s goal of achieving a “soft landing” for the economy.

The unemployment rate ticked up slightly to 4.1% from 4%, indicating a minor loosening in the labor market. This small increase could be seen as a positive sign, as it may help ease wage pressures without signaling a significant economic downturn.

Read why the U.S. economy is not currently in a recession and why it’s premature to say so.

Jobs Data, Unemployment Rate

Private sector job growth, however, came in lower than expected at 136,000, compared to the consensus of 160,000 and the previous month’s 193,000. This slowdown in private sector hiring could indicate that businesses are becoming more cautious in their employment decisions, possibly due to concerns about future economic conditions or in response to higher interest rates.

Federal Reserve Monetary Policy Report

These job figures, when viewed in the context of the Fed’s recent Monetary Policy Report, suggest that the labor market is moving towards better balance. The report noted that job gains have been strong while the unemployment rate remains low. It also highlighted that job vacancies have continued to decline and labor supply has increased, contributing to a more balanced labor market in the first half of the year.

The Fed’s report also emphasized that inflation, while easing, remains above the 2% target. The Committee has maintained the federal funds rate at 5.25% to 5.5% since July 2023 and does not anticipate reducing rates until it has greater confidence that inflation is moving sustainably towards the 2% goal.

Federal Funds Rate Chart

The latest jobs data could be seen as supportive of the Fed’s current stance. The moderate job growth and slight uptick in unemployment suggest a gradual cooling of the labor market, which could help ease inflationary pressures without triggering a sharp economic downturn.

However, the Fed remains cautious, stating that it will carefully assess incoming data, the evolving outlook, and the balance of risks when considering any adjustments to the target range for the federal funds rate. The Committee is aware of the need to balance the risks of reducing policy restraint too soon or too much against reducing it too late or too little.

While the recent jobs data presents a mixed picture, it appears to be moving in a direction that aligns with the Fed’s goals. The gradual cooling of the labor market, combined with ongoing efforts to control inflation, could provide the Fed with the confidence it needs to consider policy adjustments in the future. However, the path forward remains uncertain, and the Fed will likely continue its cautious approach in the coming months.

Lazarus Lucas is the Publisher, editor, and creator of LJLNews. Stock Market enthusiast, with an interest for politics. Independent trader, analyst, and asset manager. Lazarus publishes articles on LJLNews with technical analysis on various markets, such as currencies, stocks, and commodities. Contact: Lazaruslucas@ljlnews.com

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