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MIAMI, FL – MAY 5: A “Now Hiring” sign is posted in the window of a business hiring workers on May 5, 2023 in Miami, Florida. The U.S. economy added 253,000 jobs in April, according to a report from the Bureau of Labor Statistics. (Photo by Joe Radle/Getty Images)
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us inflation slowed down significantly Past Year as Federal Reserve Board aggressively raised interest rates This is to cool down demand and suppress price increases.job market it’s not that cold And there is always speculation about what the latest monthly jobs report will mean for the Fed.
The central bank will continue to pay close attention to labor market conditions, particularly wages, as it focuses on curbing inflation, but labor data can only reveal so much about price increases.
The main reason is that wage statistics are good at measuring the progress of inflation, but they are not good at predicting future inflation.
Chicago Fed President Austan Goolsby said in an interview with Bloomberg that wages are “not a leading indicator of price inflation” after the July jobs report showed wage growth accelerated. On the same day, Atlanta Fed President Rafael Bostic said, “Worker wages have been trailing inflation for quite some time during this period of high inflation, so we’re still in the catch-up period, and we’re still seeing higher wages.” I look forward to seeing it.” ”
Early this month, August employment statistics It showed that wage growth slowed and the unemployment rate rose to 3.8%. Financial markets have returned to a “bad news is good news” view of economic data and will continue to react to the labor data, but ultimately it is the actual inflation data that matters most to the Fed.
“The (August jobs) data was clearly positive for markets, but at the end of the day, the trajectory of inflation will ultimately determine the Fed’s interest rate decisions,” said Quincy Crosby, chief global strategist at LPL. “Inflation remains sticky.” Financial situation according to analyst notes.
There is a clear link between the two, with Fed officials making it clear that a tight labor market is playing a role in keeping inflation high as they consider further rate hikes later this year. personnel costs This is because labor costs are the largest cost for many companies, especially those that provide services.
If companies have high labor costs because they need to offer higher wages to attract and retain talent, those costs can be passed on to consumers if productivity is not keeping up with labor costs. there is.
The problem with labor statistics in forecasting inflation lies in productivity data.
“Historically, wage increases without productivity increases have been correlated with inflation, but the problem is that productivity data is quarterly, so it’s not as real-time as monthly salaries, especially these numbers. is subject to significant revision, MUFG US economist Agron Nikhaj said in an interview with CNN.
“So while labor market data and wage growth are useful in explaining inflation, they are less useful in predicting inflation.”
This means it is possible to have strong wage growth without pushing up consumer prices, provided it is coupled with equally strong productivity growth.
Goldsby’s solution? “If you want to know if we’re beating inflation, look at inflation,” he told Bloomberg last month.
The US dollar is enjoying its longest winning streak in about nine years.
The dollar on Friday headed for its eighth straight week of gains against a basket of other major currencies, hitting its highest since the winter of 2014-2015. It has increased by 5% since mid-July. My colleague Anna Cuban reports.
The rally comes after months of instability amid concerns that the dollar is losing its status as the world’s reserve currency. Last month, speculation about a possible de-dollarization of global trade increased again after major oil producers such as Saudi Arabia joined the China-led BRICS group of countries.
“Rumors of the dollar’s demise remain highly exaggerated,” James Asay, investment director at UK-based global investment firm Abdon, told CNN.
The US dollar index, currently at a six-month high, has been supported by a series of positive economic indicators in recent weeks, raising expectations that the US Federal Reserve will keep interest rates steady for an extended period of time. There is. Higher interest rates tend to attract more foreign capital and increase the value of a country’s currency, as investors expect higher profits.
Monday: Revenue from Oracle.
Tuesday: The National Federation of Independent Business releases its August Small Business Optimism Index.
Wednesday:The UK’s Office for National Statistics releases gross domestic product figures for July. The US Department of Labor releases the Consumer Price Index for August.
Thursday: Revenue from Adobe. The European Central Bank releases its latest monetary policy decisions. The U.S. Department of Labor will release the producer price index for August and the number of new jobless claims for the week ending September 9th. The US Department of Commerce releases retail sales figures for August. China’s National Bureau of Statistics has released August statistics on industrial production, fixed asset investment, unemployment rate and retail sales.
Friday: Earnings from Lennar Homes. The Federal Reserve will release industrial production statistics for August. The US Department of Labor reports import and export prices for August. The University of Michigan releases preliminary figures on consumer sentiment for September.