Dive Brief:
- Job openings inched up in July to 7.3 million from 7.2 million in June and the hiring rate dipped to 3.2% from 3.4%, the Labor Department said Tuesday, highlighting stability in the labor market.
- Total layoffs — at 1.7 million — held broadly steady, as did the 1% layoff rate, the Labor Department said. The number of workers who voluntarily left work was also little changed at 3.1 million or 1.9%.
- “The labor market is stable, with relatively low unemployment,” Federal Reserve Governor Michael Barr said in a speech. The unemployment rate in July, at 4.1%, changed little compared with June. Barr also noted that “the economy has been growing solidly.”
Dive Insight:
The steady job market and signs of healthy economic growth give Fed policymakers some leeway to raise the federal funds rate should inflation fail to slow toward their 2% target.
The personal consumption expenditures price index, the central bank’s preferred inflation measure, rose 0.2% in July and 3.3% from a year earlier, the Bureau of Economic Analysis said Wednesday.
Central bankers have failed to slow inflation to their target for more than five years, falling short of their congressional mandate to ensure price stability as well as maximum employment.
During their next scheduled monetary policy meeting on Sept. 15-16, Fed officials will “discuss the outlook for inflation and our policy stance,” Barr said.
“If trends in the data give me some confidence that inflation is moderating on a path to 2%, then I think we can take a bit more time to assess our policy stance,” he said.
“However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates,” Barr said. Next week the government will release fresh data on consumer and producer prices.
Following the release of the jobs data, traders in interest rate futures increased the odds to 68.2% from 65.4% that policymakers at their meeting this month will increase the benchmark rate by a quarter point, according to CME Group’s FedWatch tool.
The federal funds rate is currently set at a range from 3.5% to 3.75%.
Barr’s focus on inflation aligned with a speech by Fed Chair Kevin Warsh on Friday in which he said he “would be hard pressed to describe broad financial conditions as restrictive.”
“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” Warsh said. “Otherwise, we have work to do. That's our job . . . our mandate . . . and our charge to keep.”
Referring to employment, Warsh said, “our country is doing well. Labor markets are quite stable.”
In another encouraging sign for Fed officials, manufacturing activity in August slowed a bit but expanded for the eighth straight month, according to a survey of companies by the Institute for Supply Management.
The ISM’s purchasing manager’s index dipped to 54.6 last month compared with 55.6 in July, ISM Chair Susan Spence said in a statement, noting that the overall economy expanded for the 22nd straight month.
An index of new orders rose for the eighth consecutive month, while an index of prices increased at the same pace as in July, Spence said.
