“These are not the employment numbers you were hoping for”can we read in the Wall Street Journal. The US Department of Labor announced on Friday that the US economy added 263,000 new jobs in September, slightly less than analysts’ forecasts. “The boiling job market let out some heat but the water is still hot”sums up to Washington Post Guy Berger, economist at LinkedIn.
Because the unemployment rate has meanwhile fallen, from 3.7% in August to 3.5% last month, the lowest in fifty years “reinforcing the idea that the job market remains robust”note it New York Times. A finding that worries Wall Street.
“Why is good news for the economy bad news for the stock market and the Fed? “, request CNN. Answer : “Rising employment and low unemployment are generally seen as positive news but coupled with above average wage growth and anemic labor force participation, the math changes”.
In the current context of very high inflation, these figures are likely to push the US central bank to raise interest rates once again. “For financial markets, this means the virtual certainty that the Fed will approve a fourth consecutive 0.75 point hike when it meets in early November,” says CNBC. However, an increase in rates implies an increase in costs for companies, which impacts the price of shares, underlines the Times.
Pressure on Democrats
The Wall Street Journal remember moreover that part of the good employment figures can be explained by a smaller workforce, the number of Americans looking for work having decreased since the pandemic. Today there are 1.7 jobs for every worker, reports the business daily.
So investors fear, according to CNBCthat the Fed’s rate hike policy, without completely countering inflation, ends up “drag the economy into a deep and prolonged recession”. The institution’s representatives have already made it clear that they want a less vigorous job market, even if it means causing a recession.
The central bank estimates that a rise in unemployment will be less violent than inflation at the level of the Seventies, notes CNN. “The Fed has learned from history that when inflation is high and it stays that way, everyone suffers, whether you have a job or not”analyzes Chris Zaccarelli, economist of Independent Advisor Alliance, quoted by the chain.
Short term, “The fastest rising prices in four decades are straining Americans’ budgets and it has become a major political issue for President Joe Biden’s Democratic Party as the midterm elections approach”observe CBS.