Read for 4 minutes (Reuters) – WASHINGTON (Reuters) – The United States’ economy added 850,000 jobs in June, putting it another step closer to the Federal Reserve’s goal of modifying monetary policy, but other figures from Friday’s employment report might complicate the central bank’s decision on what to do next and when. PHOTO FROM THE FILE: The Federal Reserve building in Washington, DC, United States, on August 22, 2018. Chris Wattie/Reuters Since the Fed indicated in December that it would not remove its assistance for the economy until there had been “significant further progress” in restoring the job market back to pre-pandemic health, businesses have added approximately 3.3 million jobs. That’s almost a third of the 10 million jobs that were still unfilled as of December, putting the US economy 6.7 million jobs short of its February 2020 employment goal. Strong economic growth and a record number of job opportunities indicate that there will be more in the months ahead. Biden and the Fed are confronting a jobs crisis – graphic According to Karim Basta, chief economist at III Capital Management, the employment growth last month “keeps them on track to achieve the requirements over the next several months,” with a likely policy move revealed as early as September. Beyond the headline number, the Labor Department’s monthly employment data could fuel debate at the Fed about the state of the recovery. The Fed stated in its response to the recession caused by the coronavirus that, in addition to the overall number of jobs and unemployment rate, it wanted to see the recovery reach women, minority populations, and others who were disproportionately affected by the pandemic. Officials are also keeping a careful eye on the employment-to-population ratio, which measures how much of the population is employed. Many of the further steps have come to a halt. “Significant more progress” for the Fed? – ‘NOT COMPLETELY CONVINCED’ The number of women working declined by roughly 130,000 from May to June, to around 71.4 million, and the labor force participation rate, which measures how many adult women are working or seeking for work, remained stable at 56.2 percent. Women’s labor force participation is still significantly lower than it was before the outset of the pandemic, at 57.8%. That has been a particular source of concern for policymakers attempting to assess if increased family obligations have permanently sidelined women from employment during the crisis, or if they have merely been temporarily displaced until schools and other services reopen. In June, the employment-to-population ratio remained constant at 58 percent, more than 3 percentage points lower than before the pandemic. The Fed is already split between officials who believe the economy simply needs more time for families to get back to normal and return to work, and others who believe the pandemic may have caused some people to retire or otherwise leave the job market for good because of the slow progress on those and other metrics. Identifying which is correct impacts how near the Fed is to achieving its goal of “maximum employment,” as well as the timing of a future policy shift. “We aren’t entirely convinced that this is the start of a much stronger trend,” wrote Andrew Hunter, senior U.S. economist at Capital Economics. “With the labor force rising by only 151,000 and still more than 3 million below its pre-pandemic peak, we aren’t entirely convinced that this is the start of a much stronger trend.” As the pandemic eases, the Fed has initiated discussions on how quickly and when to decrease its economic support, and each big data number from now until the fall might help clarify how quickly the obstacles of reopening the economy are being handled – or not. The economy has made steady but uneven progress, with rising costs as families spent money saved during the quarantine year and suppliers tried to keep up, as well as a sluggish restoration of jobs until lately. Before the end of the year, the Fed is likely to make the most immediate decision on when to begin lowering the $120 billion in monthly government asset purchases it began 16 months ago. Howard Schneider contributed reporting, while Dan Burns and Paul Simao edited the piece./n
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