Slower labor market likely means Fed pause
investmentnews.comEmployment growth in the world’s largest economy probably cooled and wage increases moderated in August, suggesting a further tempering of inflation risks that reduces the urgency for another Federal Reserve interest-rate hike.
Friday’s US jobs report is forecast to show employers boosted their payrolls by nearly 170,000 in August, while the unemployment rate held at a historically low 3.5%. The average increase in job growth over the past three months would be the smallest since the start of 2021.
Getting inflation down to 2% is expected to require softer labor-market conditions and a period of below-trend economic growth, Fed Chair Jerome Powell said Friday at the Kansas City Fed’s annual conference in Jackson Hole, Wyoming.
Other labor market data in the coming week are seen showing fewer July job openings than a month earlier, indicating labor supply and demand are coming into better balance. That may help limit wage pressures and, ultimately, inflation.
“This rebalancing has eased wage pressures. Wage growth across a range of measures continues to slow, albeit gradually,” Powell said at Jackson Hole.
Fed officials on Thursday will also get a fresh read on their preferred inflation gauge — the personal consumption expenditures price index minus food and energy. The median forecast calls for a second-straight 0.2% monthly increase in July, which would represent that smallest back-to-back advance in the underlying inflation measure since the end of 2020.
“One of the most interesting points Powell made in his Jackson Hole speech was that he thinks the Phillips Curve may have steepened: ‘There is evidence that inflation has become more responsive to labor-market tightness than was the case in recent decades.’ Nonfarm
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