© Reuters
Investing.com – The latest jobs report shows the US job market is healthy, but Bank of America (NYSE:) sees trouble ahead.
In October, the total number of nonfarm payrolls increased by 261,000, beating economists’ expectations for a 200,000 increase, which also means that America’s job growth is heading in the right direction.
Bank of America, however, expects nonfarm payroll gains to halve in the fourth quarter of 2022 and turn negative in 2023. During the first quarter of 2023, the bank expects the United States to lose about 175,000 jobs per month.
“We expect a recession to start in the first half of next year. The premise is a harder landing rather than a softer landing.”
Indeed, the US Federal Reserve has a dual mandate: to ensure price stability and to aim for maximum employment.
The first goal was a challenge: prices were anything but stable. In June, the US consumer price index recorded its largest 12-month increase in 40 years. Even though the main consumer price index has calmed down from its recent peak – September’s inflation rate was 8.2% year-on-year – it’s still high and worrying.
The labor market, the Fed’s second target, appears to be in much better shape. In September, the unemployment rate fell to 3.5%, the lowest level in several decades.
Given this strength in the labor market and runaway inflation, the Fed is aggressively raising interest rates to control the price level.
“They will accept some weakness in the labor markets to bring inflation down. We could see six months of weakness in the labor markets.”
According to the Fed’s latest projection, participants on the Federal Open Market Committee have a median forecast of 4.4% for the unemployment rate in 2023. The bank, meanwhile, sees the unemployment rate in the country rising to 5% or at 5.5% next year.
