May jobs report: Live updates

May jobs report: Live updates

Federal Reserve officials are looking at labor market data to try to figure out how higher interest rates are working.Credit…Sarah Silbiger for The New York Times

Federal Reserve officials have signaled they may keep interest rates steady at the upcoming June meeting — pausing after a string of 10 straight rate hikes to give themselves time to see how the economy shapes up. But Friday’s fresh jobs data is likely to inform policymakers as they try to decide whether this is the right moment to take a break.

Central bankers raised interest rates to a range of 5 to 5.25 percent from last month, sharply up from near zero at the start of 2022. But they have signaled for months that a pause from raising interest rates may soon be in order so that they can assess how the economy absorbs the major political changes they have already made and the consequences of other developments, such as the fallout from the recent banking crisis.

Higher interest rates cool the economy by making it more expensive to borrow to buy a house or finance a car purchase, but it takes time to have the full effect. As prices rise, companies gradually pull back on expansion plans, slowing hiring, which then leads to weaker wage growth and a slower economy overall.

That’s why policymakers look to labor market data to figure out how higher interest rates are working. They have expected that employment will decrease, that wage growth will retreat and that unemployment will begin to rise – but it has taken time to play out.

Some Fed officials prefer to hold off on a rate hike in June, giving them more time to see how higher borrowing costs and heightened uncertainty combine to constrain the economy. Patrick T. Harker, the president of the Federal Reserve Bank of Philadelphia, said this week that he is “definitely in the camp to think about skipping any increase at this meeting.”

Others have stressed that while the Fed may be ready to pause its campaign to cool the economy, that doesn’t mean it’s done raising interest rates entirely.

“A decision to hold the key rate constant at an upcoming meeting should not be interpreted as saying that we have reached the top rate for this cycle,” said Philip Jefferson, a Fed governor who is President Biden’s pick to serve as vice chairman of the institution. , during a speech this week.

“If you skip a rate hike at an upcoming meeting, the committee may see more data before making decisions on the extent of further policy tightening,” Jefferson added. The Fed vice chairman is traditionally an important communicator for the institution, someone who broadcasts how core officials think about the policy path forward.

But even as the Fed moves toward a possible pause this month, officials will pay attention to incoming data on the economy. A key inflation figure released last week came in firmer than economists had expected, and officials will receive a new consumer price index inflation report the day they meet on 13-14. June begins.

Friday’s jobs report could reinforce — or, if abnormally strong, call into question — whether a jump makes sense.

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