American job growth has demonstrated remarkable resilience over the past two and a half years, despite high inflation surpassing the Federal Reserve's 2% target and a series of aggressive interest rate hikes. This endurance is set to be scrutinized in the imminent September jobs report by the Labor Department, as new economic hurdles emerge.
On Friday, it was reported that long-term interest rates are on the rise, along with escalating energy costs. The resumption of student loan payments, broadening labor strikes, and the looming threat of a government shutdown have also been identified as potential threats to the economy.
Despite these challenges, fewer Americans are seeking unemployment benefits as companies grapple with staffing issues in the post-pandemic era. The Institute for Supply Management has reported job additions in both the manufacturing and services sectors.
The Federal Reserve, led by chairman Jerome Powell, has implemented eleven interest rate hikes since March 2022. As a result, the Fed's benchmark rate is now at a 22-year high. This surge in borrowing costs has had a significant impact on financial markets. The yield on the 10-year Treasury note has been affected and there has been a 7.2% drop in the S&P 500 stock index since late July. It has also pushed the 30-year mortgage rate to nearly 7.5%.
Traders who were expecting a Federal Reserve rate cut in spring are now predicting that it will remain elevated until 2024. Similarly, Goldman Sachs (NYSE:GS) is forecasting a slowdown in economic growth for the October-December quarter of this year.
In light of these developments, it remains to be seen how American job growth will navigate these economic challenges going forward.
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