April US jobs report shows stronger gains: Live updates





Federal funds target rate

Federal or state funding

target rate

Federal funds target rate

Federal or state funding

target rate

Federal or state funding

target rate


The Federal Reserve is trying to calm the inflamed US labor market. But it may take months before those efforts begin to bear fruit.

The central bank said on Wednesday that it will Raising interest rates by half a percentage pointt, the largest increase in more than two decades, and begins reducing its bond holdings in an effort to rein in inflation. In a press conference after the announcement, Jerome H. Powell, Chairman of the Federal Reserve, on the labor market, and in particular Record number of job opportunities As for the number of unemployed workers, as a reason policy makers have become more aggressive in recent months.

“You can see that the labor market is unbalanced: you can see that there is a labor shortage,” Powell said.

In theory, higher interest rates should lead to less demand from consumers and businesses, causing companies to post fewer jobs and hire fewer workers. Mr. Powell hopes to allow the labor market to rebalance without an increase in the unemployment rate.

But these changes won’t be apparent overnight. Interest rates take time to affect the economy, and there are reasons to believe that the process could take longer than usual this time around. Consumers, in total, are sitting on trillions of dollars of money saved during the pandemic, and many appear eager to spend it on long-awaited activities like travel. That could mitigate the impact of Fed policies, said Michael Mayer, chief US economist at Mastercard.

“The buffer available to the consumer is large, which means it may take longer to see the effect” of the rate increase, she said. “The more resilient and stronger the economy is, the Fed will have to take interest rates higher in order to see demand decline to bring down inflation.”

Ultimately, however, interest rates will have an impact, Mayer said. One of the first places the Fed’s actions are likely to appear is the housing market. Mortgage rates have risen dramatically, leading to a sharp drop in new mortgage applications, and there are signs of that Sales are starting to slow down. Construction activities – and construction jobs – will not respond as quickly, in part due to the prolonged shortage of homes for sale, but ultimately construction is likely to slow as well.

Manufacturing is also likely to feel the impact of higher rates. But the signals can be hard to interpret: Many economists have already predicted a slowdown in manufacturing this year as the pandemic subsides and consumers return to spending more on services rather than goods.

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