US, boom in employment drives out recession. But prepare new maxi-narrow Feds

There is a new employment boom in the United States, chasing away the shadows of recession, at least of an imminent or already begun recession. But it is a double-edged boom today: if today it reassures, it at the same time revives the possibility that the Federal Reserve will have to orchestrate more aggressive maneuvers in the near future to moderate demand and inflationary spirals, thus removing hopes of a soft landing of the ‘economy.

Unemployed at their lowest since 1969

In July, 528,000 jobs were created in the US, clearly beating expectations, which stood at 258,000, and once again accelerating the pace of new jobs. The unemployment rate has dropped to 3.5% from 3.6%, to an all-time low in half a century, since 1969. Payroll creation has been the strongest since February and has shattered the average of 388,000 jobs in the past four. months. Since April 2020, the time of the worst pandemic abyss, the Department of Labor has calculated the arrival of 22 million of a total of new jobs. “Both the total employed and the jobless rate have returned to the pre-pandemic levels of February 2020,” the Department of Labor stressed. The Department also revised its June data upwards, to a creation of 400,000 jobs.

Inflation also from wages?

The American economy, it must be remembered, has recovered from two consecutive quarters of contraction in GDP, at an annualized rate of 1.6% and 0.9%, a symptom of at least a “technical” recession, under the blows of inflation and the Federal Reserve’s efforts to combat it with aggressive interest rate hikes. But the job market still remains an oasis of solidity, showing surprising strength across the board last month. A force that has extended to wages, which have risen above the forecasts of 0.5% in one month by 5.2% since last year, against forecasts of 4.9%, which have fueled specters of new inflationary price-wage spirals .

In play, a new squeeze of 75 basis points

It is enough to relaunch on the markets and among analysts the debate on the size of the future monetary policy tightenings needed by the Central Bank, which has recently made it known that it wants to be particularly dependent on data in the coming months, avoiding offering clear guidance. on his actions. Wall Street, unnerved by speculation that more drastic moves than anticipated are at stake, reflected similar concerns, opening the session lower. Paradoxically, a failure to moderate the economy in response to the tight Fed could in fact make it even more difficult to obtain the aforementioned and very difficult soft landing, that is, an ideal gradual weakening of demand without giving rise to a serious crisis.

The next summit in September

The anxiety and uncertainty could be protracted. The next Fed summit will not be until the second half of September, 21 and 22, followed by appointments in November and December, in time for further employment data as well. So far, the most accredited hypothesis appeared to be a continuation of rate hikes but less draconian than the 75 basis points of the last two peaks – perhaps 50 points and then twice 25 points, bringing interbank rates close to 3.5% at the end of the year. . Investors have also wagered that, with a weakened economy, the Fed could subsequently initiate new rate cuts as early as 2023.

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US, boom in employment drives out recession. But prepare new maxi-narrow Feds

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