Unemployment in the United States is rising at an alarming rate
In the USA, analysts expect the unemployment rate to remain unchanged, but it has risen by 0.2 percentage points. This increases the likelihood of interest rate cuts by the Fed.
The previously robust US labor market is now showing signs of weakness. In July, the world's largest economy surprisingly created few new jobs, and unemployment reached its highest level in nearly three years. According to the Labor Department, the number of new jobs increased by only 114,000, far below the average analyst expectation of 175,000. The unemployment rate rose by 0.2 percentage points to 4.3 percent, a level not seen since October 2021.
Previously, signs of a slowing labor market were already apparent. In July, job growth in the private sector was relatively weak, and weekly initial jobless claims reached their highest level in a year.
The development of the labor market plays a crucial role in monetary policy, as the Fed aims for both price stability and a robust labor market. In its latest decision, the Fed kept interest rates unchanged in a range of 5.25 to 5.50 percent, maintaining them at a relatively high level.
However, after the rate decision on Wednesday, the Fed hinted at a possible first rate cut in September, following the recent wave of high inflation, and reiterated that future monetary policy decisions would depend on economic data. Alongside the labor market, inflation in the US has also eased. In June, inflation fell to 3.0 percent from a previous 3.3 percent, moving closer to the Fed's target of 2 percent.
Given the weak job growth and rising unemployment, discussions about the impact on employment and social security have become more pronounced. The uncertainty surrounding the labor market could potentially impact social welfare programs, necessitating careful consideration and adjustments by policymakers.
Given the Fed's focus on maintaining both price stability and a robust labor market, any rate cuts could have implications for employment and social security benefits, as these often have indirect connections to monetary policy decisions.
