A blowout US jobs report for July means the Federal Reserve will probably need to keep going with the most aggressive rate rises in decades to curb demand and inflation, economists say.
US employers added 528,000 jobs last month, more than all estimates, the unemployment rate fell to a five-decade low of 3.5 per cent, and wage growth accelerated, the Labour Department said.
“The good news is people can get jobs, the bad news is that inflation remains too high and our number one priority is to get that down,” San Francisco Fed president Mary Daly said on Friday on Fox News.
The data added impetus for the Federal Open Market Committee to raise interest rates by 75 basis points when it meets in September. This matches the moves it made in June and July as it works to cool an inflation rate that is running at a 40-year high.
The strong momentum could also suggest the central bank will need to keep rates higher for longer, contrary to market expectations for rate cuts in 2023.
The labour market is “still sizzling” and that can feed into inflation, said Diane Swonk, the chief economist at KPMG. “This argues for another 75 basis point hike by the Fed.”
Fed chairman Jerome Powell said last week that another large rate increase at the September meeting was possible. However, he gave no specific forward guidance and said future increases would depend on data. Investors interpreted the remarks as a pivot to a less aggressive posture and markets rallied in response.
Fed presidents this week have strongly countered that impression. They argued that the central bank was not intending a pivot away from aggressive increase and that it would take significant news to alter their position.
Friday’s jobs data, while important, was only one of four critical reports that will shape the FOMC decision next month. There will be one more employment print and two consumer-price index readouts, with the July data out on August 10. That report should show slowing inflation because of plunging gas and commodities prices.
“If we get to September with things being where they are today — and that’s a big if — 75 basis points and signals of the risk of another 75 basis points, that’s what you’ll see,” said Mohamed El Erian, chief economic adviser to Allianz.
Ultimately, it is the inflation data, which could also be affected by falling commodity prices and supply-chain improvements, that will decide the September move, said Julia Coronado, co-founder of MacroPolicy Perspectives and a former Fed economist.
The jobs data “would lean in favour of either a 75 basis-point hike or a longer hiking cycle, because we are not seeing moderating job growth", she said.
Ms Daly, who is not a voter on this year’s policy-setting committee, on Friday echoed remarks made earlier this week when she indicated she preferred a 50-basis-point increase in September.
“We don’t need to be too aggressive because we do already see signs of slowing,” Ms Daly said. “Interest rates rise, but it takes a while for them to move fully through the economy.”
“The July jobs report settles it — we are not in a recession. More importantly, it also means the Fed will likely have to hike by another 75 basis points in September. Hiring was broad-based across sectors, and there was no evidence of widespread layoffs," Bloomberg US economists said.
"The labour market has tightened even further from a high starting point. If there was any question of a dovish Fed pivot, this report has quashed it.”
Yields on two-year Treasuries surged in response to the jobs report, a reflection of the expected Fed rates over that period. Market pricing indicated a 75 basis-point increase to the Fed’s key rate is now seen as a more likely outcome at the central bank’s September meeting than 50 basis points.
Mr Powell has described the labour market as “tight to an unhealthy level". He has therefore been seeking a moderation to help to bring demand for products and services more in line with supplies that have been constrained by Covid-19 disruptions.
He and other Fed leaders are worried about the potential for a wage-price spiral, with higher wages feeding into inflation in a cycle that is hard to break.
“This number is so comprehensively strong with a pretty significant uptick in wages,” said Mark Spindel, chief investment officer at MBB Capital Partners in Chicago.
“Companies are paying up for labour. Income matters most. When you look at the breadth of the employment report, and the earnings, this is an enormous tailwind for income.”
The upper bound of the Fed’s benchmark is now at 2.5 per cent. Policy makers will have to ensure the target rate to the region is at 4 per cent and hold it there for some time to quell inflation and price expectations, said Randall Kroszner, a former governor at the central bank.
“You’ve really got to make sure that inflation and inflation expectations have come down and are out of the system,” said Mr Kroszner, an economics professor at the University of Chicago Booth School of Business.
After the jobs report, he said that a 75 basis-point increase “will be on the table for the next meeting".
German intelligence warnings
- 2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
- 2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
- 2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250
Source: Federal Office for the Protection of the Constitution
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
COMPANY PROFILE
Name: Akeed
Based: Muscat
Launch year: 2018
Number of employees: 40
Sector: Online food delivery
Funding: Raised $3.2m since inception
MATCH INFO
Uefa Champions League final:
Who: Real Madrid v Liverpool
Where: NSC Olimpiyskiy Stadium, Kiev, Ukraine
When: Saturday, May 26, 10.45pm (UAE)
TV: Match on BeIN Sports
UAE currency: the story behind the money in your pockets
Like a Fading Shadow
Antonio Muñoz Molina
Translated from the Spanish by Camilo A. Ramirez
Tuskar Rock Press (pp. 310)
Paatal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
APPLE IPAD MINI (A17 PRO)
Display: 21cm Liquid Retina Display, 2266 x 1488, 326ppi, 500 nits
Chip: Apple A17 Pro, 6-core CPU, 5-core GPU, 16-core Neural Engine
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Front camera: 12MP ultra-wide, f/2.4, Smart HDR 4, full-HD @ 25/30/60fps
Biometrics: Touch ID, Face ID
Colours: Blue, purple, space grey, starlight
In the box: iPad mini, USB-C cable, 20W USB-C power adapter
Price: From Dh2,099
Results:
5pm: Maiden (PA) Dh80,000 2,200m | Winner: AF Al Montaqem, Bernardo Pinheiro (jockey), Ernst Oertel (trainer)
5.30pm: Maiden (PA) Dh80,000 1,200m | Winner: Daber W’Rsan, Connor Beasley, Jaci Wickham
6pm: Handicap (PA) Dh85,000 1,600m | Winner: Bainoona, Fabrice Veron, Eric Lemartinel
6.30pm: Handicap (PA) Dh80,000 1,600m | Winner: AF Makerah, Antonio Fresu, Ernst Oertel
7pm: Wathba Stallions Cup Handicap (PA) Dh70,000 | Winner: AF Motaghatres, Antonio Fresu, Ernst Oertel
7.30pm: Handicap (TB) Dh90,000 1,600m | Winner: Tafakhor, Ronan Whelan, Ali Rashid Al Raihe
The five pillars of Islam
UAE currency: the story behind the money in your pockets
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
Match info
Liverpool 3
Hoedt (10' og), Matip (21'), Salah (45 3')
Southampton 0
The specs
Engine: 2.0-litre four-cylinder turbo
Power: 268hp at 5,600rpm
Torque: 380Nm at 4,800rpm
Transmission: CVT auto
Fuel consumption: 9.5L/100km
On sale: now
Price: from Dh195,000
The biog
Favourite Quote: “Real victories are those that protect human life, not those that result from its destruction emerge from its ashes,” by The late king Hussain of Jordan.
Favourite Hobby: Writing and cooking
Favourite Book: The Prophet by Gibran Khalil Gibran
How to join and use Abu Dhabi’s public libraries
• There are six libraries in Abu Dhabi emirate run by the Department of Culture and Tourism, including one in Al Ain and Al Dhafra.
• Libraries are free to visit and visitors can consult books, use online resources and study there. Most are open from 8am to 8pm on weekdays, closed on Fridays and have variable hours on Saturdays, except for Qasr Al Watan which is open from 10am to 8pm every day.
• In order to borrow books, visitors must join the service by providing a passport photograph, Emirates ID and a refundable deposit of Dh400. Members can borrow five books for three weeks, all of which are renewable up to two times online.
• If users do not wish to pay the fee, they can still use the library’s electronic resources for free by simply registering on the website. Once registered, a username and password is provided, allowing remote access.
• For more information visit the library network's website.
MATCH INFO
Manchester United v Brighton, Sunday, 6pm UAE
The Lowdown
Kesari
Rating: 2.5/5 stars
Produced by: Dharma Productions, Azure Entertainment
Directed by: Anubhav Singh
Cast: Akshay Kumar, Parineeti Chopra
Suggested picnic spots
Abu Dhabi
Umm Al Emarat Park
Yas Gateway Park
Delma Park
Al Bateen beach
Saadiyaat beach
The Corniche
Zayed Sports City
Dubai
Kite Beach
Zabeel Park
Al Nahda Pond Park
Mushrif Park
Safa Park
Al Mamzar Beach Park
Al Qudrah Lakes
SERIES INFO
Schedule:
All matches at the Harare Sports Club
1st ODI, Wed Apr 10
2nd ODI, Fri Apr 12
3rd ODI, Sun Apr 14
4th ODI, Sun Apr 16
UAE squad
Mohammed Naveed (captain), Rohan Mustafa, Ashfaq Ahmed, Shaiman Anwar, Mohammed Usman, CP Rizwan, Chirag Suri, Mohammed Boota, Ghulam Shabber, Sultan Ahmed, Imran Haider, Amir Hayat, Zahoor Khan, Qadeer Ahmed
Zimbabwe squad
Peter Moor (captain), Solomon Mire, Brian Chari, Regis Chakabva, Sean Williams, Timycen Maruma, Sikandar Raza, Donald Tiripano, Kyle Jarvis, Tendai Chatara, Chris Mpofu, Craig Ervine, Brandon Mavuta, Ainsley Ndlovu, Tony Munyonga, Elton Chigumbura
Major matches on Manic Monday
Andy Murray (GBR) v Benoit Paire (FRA)
Grigor Dimitrov (BGR) v Roger Federer (SUI)
Rafael Nadal (ESP) v Gilles Muller (LUX)
Adrian Mannarino (FRA) Novak Djokovic (SRB)
Globalization and its Discontents Revisited
Joseph E. Stiglitz
W. W. Norton & Company
More from Rashmee Roshan Lall
MATCH INFO
Champions League quarter-final, first leg
Tottenham Hotspur v Manchester City, Tuesday, 11pm (UAE)
Matches can be watched on BeIN Sports
MATCH INFO
Syria v Australia
2018 World Cup qualifying: Asia fourth round play-off first leg
Venue: Hang Jebat Stadium, Malayisa
Kick-off: Thursday, 4.30pm (UAE)
Watch: beIN Sports HD
* Second leg in Australia on October 10
Opening day UAE Premiership fixtures, Friday, September 22:
- Dubai Sports City Eagles v Dubai Exiles
- Dubai Hurricanes v Abu Dhabi Saracens
- Jebel Ali Dragons v Abu Dhabi Harlequins
UAE currency: the story behind the money in your pockets
Biog
Age: 50
Known as the UAE’s strongest man
Favourite dish: “Everything and sea food”
Hobbies: Drawing, basketball and poetry
Favourite car: Any classic car
Favourite superhero: The Hulk original
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