The US Bureau of Labor Statistics recently reported that employers added 253,000 jobs in April, surpassing the expected 180,000. However, previous months' employment data saw significant downward revisions, and the Federal Reserve's tighter monetary policy could soon impact the labor market.
The Fed has increased interest rates ten times since last March to combat inflation, which currently stands at 5%.
Demand for workers still outstrips supply in the hospitality and food service industries, pushing wages upward. Inflation in the goods and energy sectors has shifted to hotels, air travel, and childcare services. A weaker economy could reduce demand for these services, stabilizing prices and limiting wage growth.
The US will likely witness a rise in layoffs soon, as the Fed began its tightening cycle in mid-March 2022. Whether this translates into a recession remains uncertain, as the post-pandemic labor market remains tight, with 1.7 job openings per unemployed worker.
If banks become more cautious, credit availability for businesses will be limited, slowing growth and potentially destabilizing the labor market.
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