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Economic Watch: U.S. jobs report strong, but hard landing possible by year end

By Matthew Rusling (Xinhua) 15:34, May 08, 2022

     WASHINGTON, May 8 (Xinhua) -- The United States saw strong job growth in April, but fears are mounting over whether the economy is headed for a hard landing later this year.

  The United States in April added slightly more jobs than analysts had expected, despite skyrocketing inflation and fears of slowing growth, the U.S. Bureau of Labor Statistics reported on Friday.

  Nonfarm payrolls rose by 428,000 for the month of April, and the jobless rate stood at 3.6 percent, the report found.

  Economists said the number indicates a resilient job market. But even so, economists worry the pace of growth will slow in the coming quarters and even lead to a downturn, although there is still no consensus on this issue.

  Desmond Lachman, resident fellow at the American Enterprise Institute and a former official of the International Monetary Fund, told Xinhua Friday's strong jobs report shows a strong U.S. economy.

  However, "my expectation is that the Fed's recent shift to a more hawkish monetary policy stance will lead to a hard economic landing," he said, adding that there will be a recession at year's end.

  The Fed on Wednesday raised rates by half a percentage point, in a bid to tame surging inflation. Fed Chairman Jerome Powell noted at a press briefing that the central bank is "strongly committed to restoring price stability."

  "As the economy moves into recession later this year, today's strong employment growth will be followed by weak jobs numbers towards year end," Lachman said.

  Bill Dudley, former president of the New York Federal Reserve Bank, told CNN earlier this week that achieving a soft landing will be tough because of the surging jobs market - so hot that the jobless rate might need to rise to get inflation under control.

  "The chances of pulling this off are very, very low because they have to push up the unemployment rate," Dudley said.

  "In the past, when you've pushed up the unemployment rate, you've almost never been able to avoid a full-fledged recession," Dudley said.

  Still, a number of analysts and economists note that Americans are spending large sums of cash - a positive sign - which they saved during the pandemic, and that large U.S. corporations are seeing record profits.

  Other economists argue that as Europe and other regions fret over flagging growth, investors will put their money into U.S. markets - by far the world's deepest and most liquid.

  Others have faith that the Fed will avoid cranking up interest rates so high as to trigger a recession, and believe the central bank will be able to control the fastest pace of inflation in 40 years.

  Sam Bullard, senior economist at Wells Fargo, a major U.S. bank, told Xinhua that Friday's jobs report "still projects forward momentum in the U.S. economy as we move through the second quarter."

  While there are substantial risks that need to be monitored, such as geopolitical events and inflation, on balance the data is still supportive of continued U.S. economic expansion, he said.

  Bullard anticipates consumer spending will be more materially impacted by higher inflation in the second quarter.

  Daniel Zhao, senior economist at jobs review site Glassdoor, argued on the company's website that "the job market is continuing to plow forward undeterred, buoyed by strong employer demand."

  "As the Federal Reserve raises rates, the labor market looks resilient with room to continue adding jobs even as conditions cool," Zhao said.

  Diane Swonk, chief economist at the major accounting firm Grant Thornton, noted that Fed Chair Powell was hopeful that he could derail inflation without a "significant" increase in unemployment. "Hope is not the same as reality," Swonk said.

  When asked about recession risks, Powell told a press conference Wednesday that "there is a path" to a soft landing, which would allow the Fed to get inflation down without having to slow the economy substantially and allow unemployment to rise materially.

  The Fed chair, however, also admitted that he expects this to be "very challenging," adding that there are factors outside of the Fed's control.

  "Calibrating monetary policy in a way that cools the labor market enough to bring down inflation but not so much that it tips the economy into recession will be a difficult task," Sarah House and Michael Pugliese, economists at the Wells Fargo Securities, said in an analysis. 

(Web editor: Xue Yanyan, Bianji)

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