A quandary for the Fed: Dealing with hot inflation and cool job growth
Summary
The U.S. jobs market weakened in July, with employers cutting 23,000 jobs unexpectedly. This change makes it harder for the Federal Reserve to decide whether to raise interest rates to fight inflation or hold steady to support jobs.Key Facts
- In July, the U.S. lost 23,000 jobs, contrary to expectations.
- The Labor Department lowered previous job growth numbers for May and June by 103,000 combined.
- The Federal Reserve usually raises interest rates to lower inflation and cuts rates to help jobs when the economy weakens.
- Inflation in June was 3.5%, higher than the Fed’s 2% target but lower than May’s 4.2%.
- The Fed is now more likely to keep interest rates steady in September rather than raise them.
- The Consumer Price Index for July is expected to show inflation slowed to 3.4%.
- Wages have risen about 38% over seven years, but prices have increased nearly 30%, leaving workers with smaller real gains.
- Businesses are cautious about hiring because of uncertainty linked to high energy prices, tariffs, and immigration policies.
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