- Advertisement -spot_img
Sunday, May 29, 2022

The Fed is likely to say the economy is at or close to full employment.

On Wednesday, Federal Reserve officials are expected to stress that their upcoming moves to slow down economic support are based not only on fears about inflation: the labor market also showed a surprisingly fast recovery.

The Fed is to release its January monetary policy decision at 2:00 pm and some economists expect officials to say the labor market is at or close to full employment set by the central bank, setting the stage for an upcoming rate hike . The Fed is expected to aim for both maximum employment and stable prices, and investors expect the central bank to raise borrowing costs from near zero in March as the economy recovers and policymakers try to contain rising costs.

“We expect the committee to conclude that the economy is at full employment and that it would be appropriate to raise the discount rate ‘soon’,” Barclays economists wrote in a research note ahead of the meeting.

Here are the labor market data that central banks have been paying attention to and their position compared to the pre-pandemic period.

  • Unemployment approaches its pre-pandemic levels. The unemployment rate, which measures people who are unemployed but actively applying for jobs, fell to 3.9% in December – not far from the pre-pandemic level of 3.5%. At the beginning of the pandemic, this figure jumped to 14.7 percent, and its rapid decline came as a big surprise to most economists.

  • The employment rate of people in their peak working years – from 25 to 54 years old – is also recovering. About 79% of people in this age group are working, compared to 80.5% before the pandemic.

    However, this remaining shortfall is due to the fact that, compared to February 2020, there are approximately 1.6 million fewer adults working during their main employment period. Health and childcare issues can keep some people from looking for work. A large number of workers over 55 have also gone missing, but it is not clear if they will return or retire.

  • Vacancies and layoffs remain high, a sign that labor is in high demand as the supply of workers remains tight. The layoff rate, which measures the number of people leaving their jobs as a share of employment, hit a record high 3 percent in November.

  • Wages are also rising fast, which is another sign that employers are looking to find and retain workers. The Employment Cost Index, a measure of wages, salaries and benefits closely monitored by the Fed, rose sharply in the third quarter and is expected to show another significant rise when it is released on Friday. Average hourly earnings are also rising rapidly, although for most people they are struggling to keep up with inflation.

  • Inflation will also be in the spotlight. Jerome H. Powell, Fed Chairman, is likely to talk about how a strong labor market could interact with inflation this year. Wage increases never led to significant inflation during the pre-pandemic business cycle, but prices are now rising rapidly in some labour-intensive sectors, including restaurants and personal care. Companies regularly talk about passing on higher labor costs to consumers.

    “Pay rates have risen significantly, and we have received a double-digit increase in wage rates as a percentage as we raised wages to attract and retain enough staff to keep our restaurants operating at close to business as usual.” — Ryan M. Zink, said the chief executive of fast food chain Good Times Restaurants during an earnings call last month. “We’ve made price adjustments and increased productivity to dampen some of the rising labor costs.”

World Nation News Desk
World Nation News Deskhttps://www.worldnationnews.com
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
Latest news
Related news
- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here