Jobs Boost
After the Federal Reserve raised interest rates last month--for the 17th time in two years--policymakers said that any future rate hikes would depend on "incoming information." Well, inflation-wary Fed Chairman Ben Bernanke received a nice chunk of info last week when the Labor Department reported that 121,000 new jobs were added in June while the unemployment rate stayed steady at 4.6 percent.
Those numbers, while solid, were a bit weaker than the 175,000 or so jobs that economists were expecting. So does this mean it is now less likely that the Fed will raise rates at its August 8 meeting? Hugh Johnson, economist at First Albany, thinks so. "Any important economic number that comes in and is softer than expected is telling investors that the Fed is likely to pause," Johnson says.
Still, various inflation reports and another jobs tally will come out before the next Fed meeting. Economist Brian Wesbury of First Trust Portfolios thinks the jobs numbers actually bolster the case for more rate hikes. He notes that average hourly earnings jumped 0.5 percent in June and are now up 3.9 percent during the past year. They have risen at a 4.3 percent annual rate in the past six months. "Wages are surging, and the labor market is very tight," Wesbury says. "I don't think that indicates a pause."
This story appears in the July 17, 2006 print edition of U.S. News & World Report.
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