Jobs report set to show whether hiring kept up robust pace
Better-than-expected hiring this year helped dispel fears of a recession.
A fresh jobs report on Thursday will provide a key gauge of economic strength as the United States navigates a surge of inflation and consequential negotiations in the Middle East.
Better-than-expected job gains so far this year have helped dispel fears of a recession. The labor market added a robust average of about 114,000 jobs each month from January to May, Bureau of Labor Statistics data showed.
Economists expect employers to have kept up that pace, hiring 115,000 workers in June. That would amount to a slowdown from 172.000 jobs added in May, but it would still be a solid clip for labor market growth.
Hiring has proven unexpectedly resilient in recent months, despite a rise in costs borne by businesses and shoppers.
The Middle East conflict, which began on Feb. 28, prompted the Iranian closure of the Strait of Hormuz, a maritime trading route that facilitates the transport of about one-fifth of the global oil supply. The standoff triggered one of the largest oil shocks ever recorded.
The pace of annual inflation stands at 4.2%, clocking in at more than twice the Federal Reserve’s target rate of 2%.
The combination of elevated inflation and a resilient labor market has raised the chances of an interest rate hike, futures markets show, posing a risk for corporations eager to keep borrowing costs relatively low.
Federal Reserve Chair Kevin Warsh briefly sent stocks tumbling this month during his first press conference atop the central bank. Warsh voiced a commitment to bringing inflation down to the Fed's desired level.
"Persistently high prices are a burden for the American people," Warsh told reporters in Washington, D.C. "This committee will deliver price stability."
Futures markets peg the odds of an interest rate hike in September at about 64%, according to the CME Group's FedWatch Tool, a measure of investor sentiment.
To be sure, the path forward for interest rates remains highly uncertain. Oil and gasoline prices have eased in recent weeks in response to negotiations between the U.S. and Iran, offering hope of a cooldown of inflation in the absence of rate increases.
On Wednesday, Warsh weighed in on the bullish side of an ongoing debate among policymakers, investors and the general public about the potential impact of AI on the labor market and wider economy.
The technology could create jobs and boost productivity, strengthening the economy of the U.S. and other nations, according to Warsh.
"This is a big paradigm shift both for the conduct of our policy and for our economies," Warsh said. "I think the jobs will be greater. Prosperity will be stronger."
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