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Federal Reserve Unlikely to Dial Back Rate Increases After Strong Jobs and Wages Data
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Good day. Since the last Federal Reserve meeting, U.S. labor market data suggests wages have been even stronger than earlier reported, while hiring has been brisk. Employers added 528,000 jobs in July, recouping all of the jobs lost since February 2020, and the unemployment rate fell to 3.5% from 3.6% during the previous four months, the Labor Department said Friday. That will make it harder for the Fed to slow the pace of rate increases at its meeting next month. As Fed governor Michelle Bowman said following Friday’s jobs report, more 0.75-percentage-point rate increases “should be on the table until we see inflation declining in a consistent, meaningful and lasting way.”
Now on to today’s news and analysis.
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Jobs Report to Keep Fed on Aggressive Tightening Path
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Fed Chairman Jerome Powell said recently that the U.S. economic outlook remained unusually uncertain. PHOTO: JIM LO SCALZO/SHUTTERSTOCK
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The July jobs report defied expectations of an economic slowdown and will make it harder for the Federal Reserve to dial back the pace of rate increases at its meeting next month.
The Fed is trying to slow economic activity and hiring to bring down inflation that is running at 40-year highs. Friday’s job report shows the economy is still firing on many cylinders, making it more likely central bank officials conclude they need to raise rates to higher levels and to keep rates at those levels for longer to cool the economy.
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Fed’s Bowman Says Large Interest-Rate Rises Could Continue
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Federal Reserve governor Michelle Bowman said the U.S. central bank could follow two consecutive 0.75-percentage-point rate rises this summer with a third such increase at its meeting next month.
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Senate Passes Democrats’ Climate, Healthcare and Tax Bill
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The Senate passed a bill Sunday spending hundreds of billions of dollars on climate and healthcare programs while raising taxes on large, profitable companies, as Democrats unified around elements of President Biden’s agenda after a year of frustrated efforts to advance a broader package.
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U.S. Added 528,000 New Jobs as Unemployment Rate Fell to 3.5%
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The U.S. economy has now recouped the 22 million jobs lost early in the Covid-19 pandemic, adding 528,000 positions in July as employers clamored for workers despite a slowdown in economic growth.
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Snapshot of Jobs Market as It Reaches Pandemic Recovery Milestone
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Even with the jobs recovery, the labor market has changed in many ways. Here is a breakout of how different industries and demographic groups have fared as the U.S. labor-market recovery reaches a historic moment.
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Inflation Makes Biden’s Message on Economy a Hard Sell
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When tough economic data arrives, President Biden and his aides tend to say the data is outdated or incomplete and flood social media with more upbeat assessments that sidestep an inflation rate at a four-decade high.
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Lower Gas Prices Threatened by Fuel Makers’ Limitations
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American fuel makers dialed down output this month, a move that will reduce gas supplies and threatens to slow the fall in gasoline prices, which are down about 91 cents from a record national average of $5 a gallon this summer.
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Key Developments Around the World
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Weak Growth, Tight Job Markets Are a Global Phenomenon
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Talk of a “jobful recession” has centered on the U.S., where the jobless rate fell to its prepandemic low of 3.5% even as output shrank in the three months through June. The same conundrum crops up around the world.
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China’s Export Growth Stays Robust, Offsets Broader Weakness
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Chinese exports rose to $332.9 billion in July, China’s General Administration of Customs said, up 18% from a year earlier and beating a median forecast of 15.6% growth of economists polled by The Wall Street Journal.
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Russian Aggression Brings High Anxiety to Strategic Sliver of Europe
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What worries Western military strategists is that Russia, having seized the Crimean peninsula in 2014 and invaded Ukraine this year, might resort to force to try to take over the Suwalki Gap, which would link Kaliningrad with Belarus.
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Financial Regulation Roundup
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U.S. Weighs New Rules for Regional Banks, Complicates Merger Plans
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The Federal Reserve and the Office of the Comptroller of the Currency are discussing whether regional lenders should hold more long-term debt that can help absorb losses in a downturn, say people familiar with the matter.
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Before Crypto Lender Celsius Crashed, CEO Was Known for Battles
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For some 30 years, Alex Mashinsky barreled into whatever was the hot technology of the time, promising revolutions in long-distance calling and, most recently, crypto. He often left a trail of unhappy friends, colleagues and investors.
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Coinbase’s Rapid Rise Left It Exposed in Crypto’s Collapse
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After its fast expansion, Coinbase Global Inc., the largest American crypto exchange, must wrestle with a sprawling business that now faces high expenses, dwindling cash and, more recently, a challenge from federal regulators.
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10 a.m.: Conference Board Employment Trends Index for U.S. for July
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8:30 a.m.: U.S. productivity and costs for second quarter (preliminary)
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Jobs Are Back, Baby, but Maybe Not Your Job
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With many Americans less enamored of piling up goods, and reengaging in activities such as going out, there could be some big changes coming for the employment picture in the months ahead, Justin Lahart writes.
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Eurozone industrial production surprised to the upside in the bloc’s main economies in June, Oxford Economics economist Mateuz Urban said in a note, as German industry expanded 0.4% on month, French industry grew 1.4%, and Spain’s rose 1.1%. Italy was a sole outlier, as collapsing car production dragged down manufacturing volumes, which fell 2.1% in June. (Dow Jones Newswires)
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Canada’s jobless rate was unchanged in July, holding steady at 4.9%, the record low recorded in June, Statistics Canada said. (DJN)
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Mexican auto production continued its recovery going into the second half, with output of cars and light trucks up 10% in July from a year earlier at 260,000 units in a third straight month of gains, and exports up 4% to 210,000 units, statistics institute Inegi said. (DJN)
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China's foreign-exchange reserves rose unexpectedly in July as prices of global financial assets increased significantly amid a strengthening U.S. dollar. The country's hoard of foreign exchange stood at $3.104 trillion at the end of July, up $32.8 billion from a month earlier, according to data released by the People's Bank of China on Sunday. (DJN)
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This newsletter is compiled by James Christie in San Francisco.
Send us your tips, suggestions and feedback. Write to:
James Christie, Jon Hilsenrath, Michael S. Derby, Nell Henderson, Nick Timiraos, Paul Hannon, Kim Mackrael, Tom Fairless, Megumi Fujikawa, Perry Cleveland-Peck, Michael Maloney, Paul Kiernan, James Glynn
Follow us on Twitter:
@WSJCentralBanks, @NHendersonWSJ, @michaelsderby, @NickTimiraos, @PaulHannon29, @kimmackrael, @TomFairless, @megumifujikawa, @pkwsj, @JamesGlynnWSJ, @cleveland_peck
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