On September 5, the U.S. Bureau of Labor Statistics announced that the unemployment rate had reached 4.3%, a level unseen since September 2017. The rise in unemployment is causing several concerns, whether it be the future of seeking employment or rising inflation.
Throughout the year, the U.S. has been adding jobs every month in hopes of decreasing the unemployment rate. Despite efforts to increase the workforce, layoffs continue to outpace them. As a result, about 7.4 million Americans are unemployed in the country, and about 1.8 million of this group have been without a job for the past six months. This month, unemployment has hit a new high, reflecting the rising challenges in the labor market.
The statistics released by the Bureau of Labor Statistics have raised employment concerns. The data illustrates the extent to which the tariffs hit consumers and companies, according to CNN. A report by CNBC also conveyed the effects of inflation and “the decline in America’s crucial immigrant workforce.” The effects of inflation are higher interest rates, corporation costs, and cost of goods. High interest rates also make borrowing money more expensive. The report notes that the job market currently has a “high level of mobility.” On the contrary, there used to be a demand for two job openings per worker. Now, there are more workers seeking positions than the number available.
Rising prices caused by tariffs have made businesses apprehensive about hiring new workers. Even though this can improve the economy, it has also contributed to rising unemployment. Upon receiving criticism, Trump has passed the blame to Jerome Powell, according to Newsweek. To specify, Powell, the head of the Federal Reserve, was appointed in 2017. Recently, Trump has accused Powell of raising interest rates during his first term. Trump called Powell “Mr. Too Late,” as reported by Newsweek. He has also mentioned that the Federal Reserve’s policies led to economic disaster. If Trump initiates tax cuts, then the Federal Reserve may have to increase interest rates.
Furthermore, economists were expecting 76,500 new jobs in August, but only 22,000 jobs were added, as stated by CNN. Due to the new tariffs and inflation, shoppers and business owners are grappling with how to adapt.
“The jobs engine that has been integral to U.S. economic growth defying expectations for the past four years is stalling” Sarah House, a senior economist at Wells Fargo said.
In addition, further information about employment data in September will be updated on October 3, as reported by the U.S Bureau of Labor Statistics.
Rising inflation is also creating a cycle of people clinging to their current positions in fear that they won’t find another job as beneficial as their current one. This trend is being reflected in the central bank’s monthly Survey of Consumer Expectations, according to CNBC. The probability of leaving one’s job voluntarily over the next year has barely changed, lowering by 0.1 percentage point to 18.9%. Expectations that the unemployment rate will rise within a year is up to 39.1%. This is up 1.7 percentage points from July. This predicts that people will find themselves unwilling or unable to find a new job due to the rising unemployment rate within a year.
Although the U.S. dollar has weakened by almost 10% this year, the U.S. economy will likely continue to grow.
“The Federal Reserve needs to cut interest rates in September, October, and December,” Heather Long, the chief economist at the Navy Federal Credit Union, said. If the Federal Reserve doesn’t alter the interest rates, companies and businesses will avoid hiring employees again.
Lowering interest rates can not only encourage businesses to grow and hire workers, but also give customers the confidence to spend and support economic activity, according to Equifax. Nevertheless, with unemployment on the rise, decreasing such rates won’t solve the problem entirely. Additional measures will be necessary to ensure that this dilemma won’t arise again in the future.
