Wed, June 19, 2024

Jobs Report & Inflation; What to Expect

Inflation

One of the biggest challenges the Fed has faced over the past period is curbing inflation. With prices for goods and services skyrocketing, consumers have taken the brunt of the dour global economic state. And as the economy remains downturned, a chain of consequences harms both corporate entities and consumers.

The job market has been a crucial component in determining and manipulating inflation. In January and February, the US had a fantastic showing, opening up many positions and blowing past expectations. March seems to be showing a cooling in the job market, with fewer openings.

As interest rates stifle economic growth, job data may be overinflated, and some theorize a new wave of layoffs. Currently, expectations are hovering around  238,000 new jobs added for March. However, the Fed would prefer it if that number were under 200,000. For reference, the pre-pandemic average was 173,000 jobs per month.

While the tight job market is fantastic news for employees, the Fed is concerned with its effect on long-term inflation. It thinks that the desperate need for workers has created overblown wages, which will spike short-term inflation. It also appears to believe that the wages will deflate to a more natural level, either via pay cuts or layoffs.

Wage growth forecasts show us a rise of 0.3% in March. Taking year-on-year data into account, that comes up to 4.3%. However, the Fed believes that number is still too high and would be more comfortable with increases between 2% and 3%.

That raises the question of how long consumers and workers are expected to take the brunt of inflation. With the numbers consistently exceeding pay increases, real earnings have stagnated or shrunk. However, the government and corporate entities remain complacent in shifting blame. With that clash between public interest and government action, inflation is poised to remain a talking point.

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