Jobs report shows gains from 428,000 jobs: live updates




Target rate of the federal funds

federal funds

target rate

Target rate of the federal funds

federal funds

target rate

federal funds

target rate


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

The central bank said Wednesday it would raise interest rates by half a percentage point, the largest increase in more than two decades, and begin scaling down its bond holdings in a bid to curb 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, as the reason policymakers had become more aggressive of late. months.

“You can see the job market is out of balance: you can see there’s a labor shortage,” said Mr Powell.

Higher interest rates should, in theory, lead to less demand from both consumers and businesses, causing firms to place fewer jobs and hire fewer workers. mr. Powell hopes this will allow the labor market to restore equilibrium 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 believe that the process could take longer than usual this time around. Overall, consumers are sitting on trillions of dollars saved during the pandemic, and many seem happy to spend it on long-delayed activities like travel. That could dampen the impact of the Fed’s policy, said Michelle Meyer, chief US economist for Mastercard.

“The buffer there is for consumers is significant, meaning it may take longer to see the impact” of tariff increases, she said. “The more resilient the economy is and the stronger it is, the higher the Fed will have to set interest rates to ensure that the slump in demand weighs on inflation.”

Still, interest rates will eventually have an effect, Ms Meyer said. One of the first places where the Fed’s actions will manifest is in the housing market. Mortgage rates have risen significantly, leading to a sharp decline in new mortgage applications, and there are signs that sales are starting to slow down. Construction activity — and construction jobs — won’t respond as quickly, in part because of the long-standing shortage of homes for sale, but eventually construction is likely to slow as well.

The industry is also likely to feel the effect of higher rates. But the signals can be difficult to interpret: Many economists have already expected a slowdown in output this year as the pandemic eases and consumers return to spending more on services than on goods.

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