Are We There Yet?

Are we there yet? Children ask that question endlessly on a long car trip. Federal Reserve officials are asking it about their drive to curb inflation.

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If timing is everything, the June employment report is a lot less encouraging than it appeared to be. 

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We knew the April labor report was going to be bad, and it was. “Dismal.” “Devastating.” “Catastrophic.” Economists, who usually refrain from hyperbole, gave in to it in the face of statistics unlike any they had ever seen or expected to see.  The economy shed 20.5 million jobs for the month and the unemployment rate hit 14.7 percent, both numbers shattering previous records.

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 Economists often miss the mark, but they rarely miss it by as much as they did with their employment forecasts for June.

The consensus forecast anticipated a loss of more than 7 million jobs on top of the stomach-churning 20.5 million positions shed in April.  Instead, employers added more than 2.5 million jobs, reducing the unemployment rate to 13.3 percent, down from April’s 14.7 percent and well below the 19 percent rate analysts had feared. 

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The forces driving the economy are no longer financial; they are primarily medical.  Concerns about the impact of the coronavirus, which continues to spread in the U.S. and abroad, have replaced speculation about whether the Fed will slash interest rates – which it did recently, announcing an “emergency” quarter-point reduction that analysts predict will be followed soon by another one, in an effort to forestall the panic that is gripping financial markets.