As Unemployment Falls, Interest Rate Increases Creep Nearer

The White House is doing what it can to promote competition, disentangle supply chains and lower prices at the margin, but controlling inflation falls mainly to the Fed, a fact President Biden underlined at a news conference on Friday.

“I’m confident the Federal Reserve will act to achieve their dual goals of full employment and stable prices, and make sure the price increases do not become entrenched over the long term,” Mr. Biden said.

Investors will get a chance to hear from key Fed officials themselves next week. Jerome H. Powell, whom Mr. Biden has renominated as Fed chair, has a confirmation hearing on Tuesday before the Senate Banking Committee. Lael Brainard, now a Fed governor and Mr. Biden’s pick to be vice chair, has a hearing on Thursday.

Both are likely to emphasize the unevenness of the recovery and acknowledge that millions of workers remain out of the job market thanks to caregiving responsibilities, virus fears and other pandemic barriers, as they have throughout the downturn.

They will probably also note that overall hiring slowed in December: Employers added 199,000 jobs, the weakest performance all year, as they struggled to find workers. And Omicron poses a risk of further retrenchment, because the November data came before the recent surge in virus cases that has kept restaurant diners at bay and shut down live performances.

But at the end of the day, it is the falling jobless rate that is likely to remain in focus for the Fed as it contemplates its next steps, economists think.

“A March rate hike seems pretty likely at this stage,” said Julia Coronado, founder of the research firm MacroPolicy Perspectives. Asked if there was one overarching takeaway from the new data, she said: “It’s just a tightening labor market. That’s it.”

Article source: https://www.nytimes.com/2022/01/07/business/economy/jobs-interest-rates-federal-reserve.html