Joseph Hargett, 02 July 2021
That’s right: The Labor Department said this morning that the U.S. economy added a better-than-expected 850,000 jobs in June … and economists are both excited and scared. On one hand, economists praised the strong jobs growth as proof that the economy is continuing to rebound strongly from the COVID-19 pandemic.
“Things are picking up,” said Indeed Economist Nick Bunker. “While labor supply may not be as responsive as some employers might like, they are adding jobs at an increasing rate.”
On the other hand, economists worry that a stronger-than-expected economic rebound could force the Fed to raise interest rates sooner rather than later.
This is an odd predicament because we all know that rates need to rise, especially amid strong economic growth. Planned and careful interest rate increases are part of a healthy and nutritious economy, after all.
If rate hikes come before Wall Street expects, you can bet stock prices will fall as money is repositioned to take advantage of higher rates.
But there was an interesting twist in today’s jobs data that blunted interest rate worries: The unemployment rate rose from 5.8% in May to 5.9% in June.
Now, typically when the economy adds so many jobs at once, the unemployment rate falls. So, what gives?