The labor market in the United States keeps challenging the central bank’s monetary policy tightening. After 10 consecutive increases in the federal-funds interest rate, from zero to a range of 5 to 5.25 percent, so far this year 1.6 million new jobs have been created, with 339,000 of those created in May. Job openings increased in April to 10.1 million, almost double the amount of the 5.7 million unemployed.
The strength in the job market, in May, was evident in almost all sectors, except in manufacturing and information. Professional and business services gained 64,000 new jobs, followed by health care 52,400, leisure and hospitality 48,000 and government 25,000. Even construction gained 25,000 jobs in May, despite the slowdown in housing. But the unemployment rate increased from 3.4 percent in April, the lowest in almost half a century, to 3.7 percent in May, which is evidence of a slowdown, but still amid strong job creation.
The question is how the Open Market Committee will interpret these signals of strength and weakness, at its next June 13-14 meeting. As described by Federal Reserve Chairman Jerome Powell, “We’ve come a long way in policy tightening, and the stance of policy is restrictive, and we face uncertainty about the lagged effects of our tightening so far and about the extent of credit tightening from recent banking stresses.” (Quoted in Bloomberg News 05/19/23).
