Fed describes labor market as strong, weak inflation as 'transitory'

Fed describes labor market as strong, weak inflation as 'transitory'

Trump last week declared a ceasefire in his trade war with China after a meeting with Chinese President Xi Jinping at the Group of 20 summit in Japan.

"We could hire 1,000 more employees today - if they were available", said Leff, whose company has about 430 locations and is based in Trevose, Pennsylvania.

The jobs data came as investors are pricing high on possible immediate interest rate cut moves by the USA central bank in order to spur growth. Most economists had expected about 160,000 jobs to be created.


A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they can not find full-time employment, rose to 7.2% in June from 7.1% in May.

Employers have expanded payrolls by 224,000 jobs in June, marking a surge after a weak May, the Bureau of Labor Statistics reported on July 5. So far this year, job growth in the industry has averaged 8,000 per month, compared with an average of 22,000 per month in 2018. As a result, year-over-year growth in wages held steady at 3.1 percent in June. In light of May's moderation in hiring Fed Chairman Jerome Powell has said job growth "bears watching". "This economy still has more room to grow". Consumer spending has solidified. Manufacturing and the housing market are struggling and the trade deficit is widening again.

The other especially unusual movement was the increase in state and local government employment outside of education. Despite the continued low unemployment rates over the past year, some workers may still be on the sidelines, a situation economists refer to as "labor slack". "On the surface, the data, in my opinion, doesn't really support an imminent cut, but markets are expecting it, and I do think there's a risk at this stage that they disappoint".


The Atlanta Fed is forecasting gross domestic product rising at a 1.3% annualized rate in the April-June quarter. Wage growth remains strong, at above 3% year-over-year, for the 11th month in a row, as a tight labor market forces employers to share the wealth generated by solid Trump-era GDP growth.

"Not only was the number strong enough to take a 50bp rate cut off the table, but it was also just high enough to add a shadow of doubt to a July cut as well", wrote Scott Buchta, the head of fixed income strategy at Brean Capital, in a note.

But the standard unemployment rate only counts people who sought jobs in the past four weeks. Some employers have complained they have had trouble finding qualified workers. There are about 7.4 million job openings.


But sentiment began shifting among Fed officials in May, after Trump's trade policy began to, in the view of many analysts, undermine global and USA economic sentiment, business investment, and ultimately growth. Things changed considerably in the second quarter, as hiring, manufacturing and business investment weakened.

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