Over the last year or so, inflation was considered to be the most formidable enemy of the U. S. economy. But what we are looking at now is a very rapidly slowing jobs market. In August 2024 there will be only 142000 new jobs, which can be explained by decreasing employment from previous months’ employment figures. Hiring activity has been at its weakest in the recent three months according to the data and this has been observed since the pandemic in 2020.
Furthermore, the new government adjustments found every year show that from the spring of 2023 through the spring of 2024, the U. S created 818,000 fewer jobs than earlier projected. In Wells Fargo’s senior economist Sam Bullard’s opine, there is a fear that the labor market is not as powerful and robust as believed, Saying:
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Fed’s Changing Focus: Inflation: From There to Here, and Job Market: From There to Here.
Yet, one must understand the fact that this slowdown is not a secret to the Federal Reserve. Inflation has been gradually declining towards the Fed’s target of 2% and hence what was previously a major concern to the Fed has become a new concern; a deteriorating labor market. The monetary policy of the Fed has the dual objectives of price stability, which is a low inflation rate and the maximum level of employment. With inflation having come down, employment has become the key focal area on the part of speculators.
Analysts expect the Federal Reserve to reduce interest rates on the country’s money markets in two weeks following the continued raising of borrowing costs to the highest level in 23 years from 45 global central banks. These high rates although help in managing the inflation rates, have at times exacerbated economic development and the pace of employment.
During June-August, the employment increased at a rate of 116000 per month compared with 267000 in March of this year. The Federal Reserve Chairman Jerome Powell said recently he does not ‘seek or welcome’ more moderation in hiring and noted, ‘We will do everything possible to maintain a good labor market.
How a Cooling Job Market can be Harmful to the Economy
This is true because when no new jobs are created and unemployment is on the rise; the U. S economy is on its way to recession. Average unemployment rate which was at 3. This figure has increased from only 4% as we saw just one and a half years ago to 4.2%, which if continues will hint at a decline period.
Speculation at the Time of Presidential Election
Another issue that is causing more confusion is the coming presidential elections. Both candidates are offering policies that are giving business and Wall Street pause. Analysis of different surveys shows that many chiefs are still cautious when it comes to new recruitments or expansion especially when the outcomes of the election are not certain.
Besides, the labor market may be even more detrimental than abysmal numbers paint it. This is seen in the fact that full-time employment has reduced by 1.49 thousand between August 2023 and August 2024, at the same time as 1.06 million which means that there are more Americans who can work only part-time. The number of unemployment benefits has also gradually risen over the past year and is now approaching normality.
Will the Fed Act Quickly Enough?
There has been a reduction in job vacancies from a recorded 12 million some years back to about 7 million. There are now 7 million beneficiaries, instead of 6 million predicted earlier, now the numbers are almost the same as before the pandemic. While Federal Reserve officials make light of it, saying that an overheated labor market was always going to be expected to slow out of its own accord due to higher rates, other economists are convinced that the Fed is being too coy over rate cuts.
Steve Blitz chief economist at TS Lombard said this, “Caution will rule at the Fed, it usually does, they cut 25 basis points and wait and see. I believe it would be a mistake. ”
As pointed out by many analysts, the risk is that the deterioration in the labor market might accelerate beyond the current trend, which would have an extended impact on the growth of the economy.
Conclusion:
The top and sides of the wheel are Management Objectives, Management Actions and Management Constraints the Centre of gravity indicates the position of the Fed.
The Federal Reserve faces a challenging balancing act: the fiscal policy is to ensure that inflation remains stable while at the same time making certain that the employment status does not worsen any further. Speaking of the potential risks for the U. S economy, a weakening labor market might also act disadvantageously; however, the interest rate cut will be beneficial, although the time may take.
Key Takeaways:
- A new threat to the US economy is emerging as the country’s job market is cooling at a very fast rate.
- Inflation has reduced meaning that the Federal Reserve has shifted toward employment matters.
- The central bank decided to cut interest rates but the timing remains a mystery.
- The presidential election that is yet to happen is generating business and Wall Street pessimism.
- The main concern here which faces the Fed is that of achieving steady low inflation and employment growth.
- Thus, it is crucial to examine these changes to help businesses, investors, or simply hard-working people who rely on their wages to look for ways to be ready for any shifts in the economic environment.
