Rising Rates and the U.S. Labor Market

Friday's nonfarm payrolls report will assess the impact of rising interest rates

How much has the Federal Reserve’s campaign to fight inflation by hiking interest rates impacted the U.S. job market? We could find out this week when the Labor Department releases its June nonfarm payrolls report on Friday.

Last week, Federal Reserve Chair Jerome Powell told a group of central bankers that there was “no guarantee” the central bank could tame runaway inflation without affecting the job market.

The closely-watched employment report is expected to show nonfarm payrolls likely rose by 270,000 jobs in June, compared to an increase of 390,000 in May. The unemployment rate for the same month is likely to remain unchanged at 3.6% in June from May. 

Ahead of the Labor Department's report, payroll provider ADP's national employment report on Thursday is expected to show private payrolls grew by 200,000 jobs in June, compared to an increase of 128,000 jobs in May. The Labor Department will also release its report on weekly jobless claims on Thursday, which is expected to show claims falling by 230,000 for the latest week, down from 231,000 in the previous week. 

All of that data still suggests a relatively healthy labor market despite the Fed’s most recent move to push up interest rates by three-quarters of a percentage point—the biggest hike since 1994. Powell said last week that while the path to a “soft landing” for the economy has narrowed, the unemployment rate remains at a half-century low, and that most households and businesses will be able to weather the fallout from higher interest rates.

"If the U.S. economy does fall into a recession, it will be very different from the typical recession over the past 50 years, given that the labor market remains strong amid persistent inflation. As Mike Wilson of Morgan Stanley said on The Investopedia Express podcast this week, it will feel a lot more like the 1940s than the 1970s," said Caleb Silver, Editor-in-Chief of Investopedia.

Total Nonfarm Payrolls 2017-2022
Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.