US continues to create jobs at full speed despite high interest rates | Economie

Job offers are as clear in Washington as they are in any large city in the United States. One goes to buy clothes and in the store there is a sign displaying the work. Same thing in the restaurant. Before the movie begins, along with announcements of upcoming releases, he encourages the last people to request a seat at the cinema. And at the bank, Cartel is presenting as a claim a transfer bonus of up to $1,500 for anyone who dares to work for the entity. The economy has created jobs at full speed after the pandemic and the unemployment rate is 3.6%. In some countries, this has never been low. The country is practically in full employment.

Figures for May released by the Bureau of Labor Statistics on Friday confirm that the unemployment rate is 3.6%, the same rate as in March and April and very close to the minimum in decades, the 3.5% set just before the pandemic. The economy experienced 17 consecutive months of job creation. In May, companies created 390,000 non-farm jobs despite tightening monetary policy and raising interest rates. Although it represents the lowest number in recent months, it is much more than expected, and not far from the numbers of the past two months.

The most notable job gains were in leisure and hospitality, professional and commercial services, and transportation and warehousing, while employment decreased in retail.

In the United States, the labor market is primarily measured by two surveys: one for businesses and one for households. The first is the main reference for the number of jobs created, and the second is used to measure the active population and the unemployment rate. In this second survey, job creation was somewhat lower (120,000 jobs per month), which, along with the increase in the active population, left the unemployment figure at 5.95 million people, or 3.6%.

The President of the United States, Joe Biden, appeared on Friday to highlight the 8.7 million jobs created during his tenure (most of which have recovered from those that were frozen due to the pandemic). Biden is trying to get the message across that the economy is doing well despite the inflation that has become the biggest concern of citizens and has eroded his popularity. Biden launched a communication strategy aimed at highlighting good economic news, such as job creation. He also blamed price hikes on Vladimir Putin for the war in Ukraine and insisted that fighting inflation was his economic priority, albeit he gave the leadership role (and another part of the blame?) to the Federal Reserve.

The gradation comes in response to concerns that inflation anxiety will negatively affect Democrats in the November 8 legislative elections. In this midterm election, 435 seats in the House of Representatives and just over a third of the 100 seats in the Senate are renewed. A majority that emerges from the polls could derail his legislative agenda for the next two years.

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A sign pointing to a Washington bank branch offers a reward of up to $1,500 for starting work at the institution.Country

After the strong destruction of employment due to the embargo, economic and monetary policy was aimed at restoring activity. The Federal Reserve flooded the markets with liquidity by buying financial assets and low interest rates. The management distributed the checks left and right. The closest thing to the metaphor of throwing money out of a helicopter is the delightful Milton Friedman metaphor popularized by Ben Bernanke.

This has made it possible to maintain activity and support recovery, but when demand is gaining strength, some supply problems (disruptions in the supply chain, restrictions in China, war in Ukraine and consequent rise in energy and food prices…) translate these Excess liquidity leads to inflation. Prices are rising at the fastest pace in 40 years, at a rate of more than 8%. Statistics published Friday show hourly labor costs are rising 5.2% year over year, fueling second-round inflation.

The US Federal Reserve has a dual mandate from Congress: to achieve full employment and price stability. While in the first subject he got honors, and failed in the second. Its advocates argue that the Fed avoided a prolonged recession, that in the middle of takeoff it was not a good time to turn off the planes’ engines and that a large part of the rate increases are exogenous and unavoidable with tighter fiscal pay. Policies. His critics point out that the central bank miscalculated the risks of inflation and did not withdraw monetary stimulus on time.

Now, with unemployment low and inflation at an all-time high, the Fed is rapidly tightening monetary conditions, by raising interest rates and lowering its balance sheet. In addition to his messages. In fact, market interest rates, and with them mortgage rates, have risen faster and faster than official rates. The Fed, which applied a half-point rate hike in May, the largest in 22 years, plans to make at least two more of the same amount in June and July, and some of its members are already warning that more is needed.

The big question is whether the Fed will be able to contain inflation without causing a recession. The path to this goal is narrow.

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