‘Disappointing’ jobs report won’t slow interest rate rise, experts say
Experts were disappointed with December’s employment figures, which were lower than the previous month. But despite this slowdown, they agreed there was no reason to think the Federal Reserve would change its tune by raising interest rates in 2022.
In December, the economy added 199,000 non-farm jobs, down from 210,000 jobs created in November, according to the latest Employment Status Summary from the US Bureau of Labor Statistics (BLS). Refinitiv economists expected 400,000 new jobs, more than double the actual job creations.
“This morning’s employment report from the Bureau of Labor Statistics again offered a mixed picture of the labor market,” Fannie Mae chief economist Doug Duncan said. “According to the earnings survey, employment growth in December was a disappointing 199,000, a deceleration from the pace of the previous month, although employment growth in the previous two months was revised upwards by 141,000 in total.”
However, Duncan pointed out that the unemployment rate fell to 3.9%, which is a positive sign for the labor market.
Given the latest job growth and unemployment numbers, experts believe the Fed is still likely to raise interest rates in the first part of 2022. If you want to take advantage of the current low rates , you can consider refinancing your mortgage to potentially lower your monthly payments. Payments. Visit Credible to find your personalized rate without affecting your credit score.
The Federal Reserve is expected to raise rates further
While the job growth rate was below expectations in December, economists were still optimistic, saying the jobless rate signaled the economy would reach full employment.
“The unemployment rate is now 3.9%,” said Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association (MBA). “The economy is at full employment. Although the participation rate is lower than it was before the pandemic, it is not changing much at the moment, which suggests that the unemployment rate will continue to fall in 2022, even if faster wage growth eventually brings more workers into the labor force.”
And experts say this low unemployment rate will likely prompt the Federal Reserve to raise interest rates, perhaps even sooner than expected.
“The Fed will be watching the December jobs report to help determine its timing for monetary policy tightening, as the unemployment rate hit a new pandemic-era low and higher wages fueled fears of rising inflation, which could accelerate the Fed’s calendar,” First said Deputy Chief U.S. Economist Odeta Kushi.
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The Omicron variant could derail economic progress
Despite the progress in the economy, an expert pointed out that the data for the December report was drawn before the spread of omicron and that the variant could cause disruption in the future.
“Employment data was collected before the Omicron variant covered the country, turning entire areas into hotspots for community spread,” said Dawit Kebede, senior economist at the Credit Union National Association (CUNA). “Therefore, the Variant – while less severe than Delta – could temporarily derail progress in the following months.”
But despite that possibility, he added that rising inflation would likely lead the Fed to continue its current momentum of raising interest rates in the first quarter of 2022.
“A 3.9% unemployment rate is good news for the Federal Reserve which is on track to end its stimulus measures by March to fight inflation,” Kebede said.
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