A historically low U.S. unemployment rate and rising wages will likely keep the Federal Reserve on track to raise interest rates by another quarter of a percentage point next month.
Investors in contracts tied to the Fed’s benchmark overnight interest rate added to bets that rates will keep rising, with a quarter-of-a-percentage-point increase next month now given a nearly two-thirds probability.
By comparison, payroll growth in the decade before the COVID-19 pandemic averaged about 180,000 per month, and wage growth remained close to the 2 percent-3 percent range seen by Fed policymakers as consistent with their goal of a 2- percent annual increase in the Personal Consumption Expenditures price index.
The median unemployment rate projected for the end of 2023 by Fed officials at their March meeting was 4.5 percent, implying a comparatively steep rise inFed officials would never say their aim is to cause a recession. But they’ve also been blunt that, as it stands, there are too manys chasing too few workers, a recipe for wage and price increases that could start to reinforce each other the longer the situation persists.
Economists at the Conference Board, meanwhile, said a new index incorporating economic, monetary policy, and demographic data showed 11 of the 18 main industries at modest-to-high risk of outright layoffs this year.
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