Strong Jobs Numbers Complicate Picture as Fed Hints at a ‘Skip’
Federal Reserve officials have signaled that they could hold rates steady at their upcoming meeting in June — pausing after a string of 10 straight rate increases to give themselves time to see how the economy is shaping up. Fresh jobs data released Friday could help to inform policymakers as they try to decide whether this is the right moment to take a break.
Unfortunately for central bankers, they made for a complicated picture: While unemployment climbed and wage growth slowed in May, evidence of the cool-down the Fed has been waiting for, actual job gains were much stronger than economists had expected.
Central bankers lifted interest rates to a range of 5 to 5.25 percent as of last month, up sharply from near-zero at the start of 2022. But they have been signaling that it could soon be appropriate to take a break from increasing rates so that they can assess how the economy is absorbing the big policy changes they have already made and the consequences of other developments, including the fallout from recent bank turmoil.
Higher interest rates cool the economy by making it more expensive to borrow to buy a house or finance a car purchase, but they take time to have their full effect. In response to steeper borrowing costs, businesses gradually pull back on expansion plans and slow hiring, which then feeds into weaker wage growth and a slower economy overall.
Source: The New York Times
