In July, the US unemployment rate rose to 4,3%. This reflects a significant slowdown in hiring as well as a growing sense of economic anxiety.
The Bureau of Labor Statistics reports that the economy has added only 114,000 new jobs in the last month. This is the lowest gain since December 2020 – a time marked by economic disruption caused by pandemics.
The economists had predicted that the unemployment rate will remain unchanged at 4.1% in June.
Fed’s response to policy under scrutiny
The latest unemployment report is causing concern about the Federal Reserve’s monetary policies, especially its timing of adjusting interest rate.
Fed Chairman Jay Powell suggested previously that the central banks could initiate their first rate reduction post pandemic as soon as September.
Job growth has been slow and unemployment is on the rise. This raises questions about whether or not the Fed was too late in addressing inflation by reducing rates.
Part of the increase in unemployment can be attributed to weather disruptions, temporary layoffs, and other factors.
BLS reported that bad weather had caused some temporary workers to be displaced, which contributed to an increase in unemployment rates.
The overall trend indicates a slower labor market despite these short-term effects.
Gains in wages and participation
Despite the increasing unemployment rate, some signs of progress are visible.
The wage growth has continued to exceed inflation in recent months.
The labor force participation rates also increased in July. This reflects an increase in people who are actively looking for work.
The job growth outside the healthcare sector, construction and some transportation and warehouse roles, was very minimal.
Manufacturing saw a small increase in jobs of only 1,000, while Professional and Business Services experienced a loss of 1,000.
Jag Kooner commented on the recent unemployment report. “The release has increased potential recession tensions.” This 4.3% number could set off the Sahm Rule – historically, a reliable indicator of recession.
The unemployment rate is also affected by factors such as increased participation in the labour market, especially among immigrants and the mismatch that exists between the number of job-seekers and positions available. This complication, coupled with the inverted yield-curve–another signal of recession–has created an air of uncertainty.
Kooner said that if the unemployment number confirms the FED’s belief that inflation has been brought under control, a rate reduction could be coming as early as September. This would make bitcoin a more attractive investment.
Control by the Federal Reserve over economic forecasts remains crucial. The Fed announced that it would maintain the key interest rate of approximately 5.5% in its most recent announcement. Powell said that the Fed is considering a rate reduction for its next meeting. This could reduce borrowing costs, and possibly stimulate hiring and demand across the entire economy.
The post US unemployment rates climb to 4.3% amid wider economic recession may be updated as new information becomes available.
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