Economists at Commerzbank provide their afterthoughts on the stellar US monthly jobs report, which showed that the economy added a whopping 528K jobs in July and the unemployment rate fell to 3.5%. The upbeat employment details now seem to have revived hopes for a larger Fed rate hike move at the September policy meeting.
“With the U.S. economy having contracted in the first two quarters of 2022, the definition of a "technical recession" popular in financial markets is fulfilled. However, the labor market, which has been very robust so far, should in the end determine whether the economy is headed for a real recession with rising unemployment and falling consumer spending.”
“At the press conference after the July meeting, Fed Chairman Powell explicitly referred to the two employment reports due before the September meeting. These would help determine whether the Fed would have to continue to apply the brakes forcefully. The first of these two data points has now been published – and shows that the labor market continues to run hot. The cooling hoped for by the Fed to lower inflationary pressure has failed to materialize. As a result, calls for another 75 basis points rate hike are likely to grow louder in the FOMC.”
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