Evelyn Reynolds

The bipartisan deal to avert a government default this week featured modest cuts to a relatively small corner of the federal budget. As a curb on the growth of the nation’s $31.4 trillion debt load, it was a minor breakthrough, at best.It also showed how difficult — perhaps impossible — it could be for lawmakers to agree anytime soon on a major breakthrough to demonstrably reduce the nation’s debt load.There is no clear economic evidence that current debt levels are dragging on economic growth. Some economists contend that rising debt levels will hurt growth by making it harder for businesses to borrow money; others say spiraling future costs of government borrowing could unleash rapid inflation.But Washington is back to pretending to care about debt, which is poised to top $50 trillion by the end of the decade even after accounting for newly passed spending cuts.With that pretense comes the reality that the fundamental drivers of American politics all point toward the United States borrowing more, not less.The bipartisan agreement to suspend the debt ceiling for two years, which passed the Senate on Thursday, effectively sets overall discretionary spending levels over that period. The agreement cuts federal spending by $1.5 trillion over a decade, according to the Congressional Budget Office, by essentially freezing some funding that had been projected to increase next year and then limiting spending to 1 percent growth in 2025.But even with those savings, the agreement provides clear evidence that the nation’s overall debt load will not be shrinking anytime soon.Republicans cited that mounting debt burden as a reason to refuse to raise the limit, risking default and financial crisis, unless Mr. Biden agreed to measures to reduce future deficits. But negotiators from the White House and House Republican leadership could only agree to find major savings from nondefense discretionary spending.That’s the part of the budget that funds Pell grants, federal law enforcement and a wide range of domestic programs. As a share of the economy, it is well within historical levels, and it is projected to fall in the coming years. Currently, base discretionary spending accounts for less than one-eighth of the $6.3 trillion the government spends annually.The deal included no major cuts to military spending, which is larger than base nondefense discretionary spending. Early in the talks, both parties ruled out changes to the two largest drivers of federal spending growth over the next decade: Social Security and Medicare. The cost of those programs is expected to soar within 10 years as retiring baby boomers qualify for benefits.While Republicans at first balked when Mr. Biden accused them of wanting to cut those politically popular programs, they quickly switched to blaming the president for taking them off the table.Asked on Fox News on Wednesday why Republicans had not targeted the entire budget for cuts, Speaker Kevin McCarthy replied, “Because the president walled off all the others.”“The majority driver of the budget is mandatory spending,” he said. “It’s Medicare, Social Security, interest on the debt.”Negotiators for Mr. McCarthy effectively walled off the other half of the debt equation: revenue. They rebuffed Mr. Biden’s pitch to raise trillions of dollars from new taxes on corporations and high earners, and both sides wound up agreeing to cut funding for the Internal Revenue Service that was expected to bring in more money by cracking down on tax cheats.Instead, Republicans attempted to frame mounting national debt as solely a spending problem, not a tax-revenue problem, even though tax cuts by both parties have added trillions to the debt since the turn of the century.Republican leaders now appear poised to introduce a new round of tax-cut proposals, which would likely be financed with borrowed money, a move Democrats decried during the floor debate over the debt-ceiling deal.“Before the ink is dry on this bill, you will be pushing for $3.5 trillion in business tax cuts,” Representative Gwen Moore, Democrat of Wisconsin, said shortly before the final vote on the Fiscal Responsibility Act, as it is called, on Wednesday.Those comments reflected a lesson Democrats took from 2011, when Washington leaders last made a big show of pretending to care about debt in a bipartisan deal to raise the borrowing limit. That agreement, between President Barack Obama and Speaker John Boehner, limited discretionary spending growth for a decade, helping to drive down budget deficits for years.Many Democrats now believe those lower deficits gave Republicans the fiscal and political space they needed to pass a tax-cut package in 2017 under President Donald J. Trump that the Congressional Budget Office estimated would add nearly $2 trillion to the national debt. They have come to believe that Republicans would happily do the same again with any future budget deals — putting aside deficit concerns and effectively turning budget savings into new tax breaks.At the same time, both parties have grown more wary of cuts to Social Security and Medicare. Mr. Obama was willing to reduce future growth of retirement benefits by changing how they were tied to inflation; Mr. Biden is not. Mr. Trump won the White House after promising to protect both programs, in a break from past Republicans, and is currently slamming his rivals over possible cuts to the programs as he seeks the presidency again.All the while, the total amount of federal debt has more than doubled, to $31.4 trillion from just below $15 trillion in 2011. That growth has had no discernible effect on the performance of the economy. But it is projected to continue growing in the next decade, as retiring baby boomers draw more government benefits. The budget office estimated last month that debt held by the public would be nearly 20 percent larger in 2033, as a share of the economy, than it is today.Even under a generous score of the new agreement, which assumes Congress will effectively lock in two years of spending cuts over the full course of a decade, that growth will only fall by a few percentage points.Groups promoting debt reduction in Washington have celebrated the deal as a first step toward a larger compromise to reduce America’s reliance on borrowed money. But neither Mr. McCarthy nor Mr. Biden has shown any interest in what those groups want: a mix of significant cuts to retirement programs and increases in tax revenues.Mr. McCarthy suggested this week that he would soon form a bipartisan commission to scour the full federal budget “so we can find the waste and we can make the real decisions to really take care of this debt.”The 2011 debt deal produced a similar sort of commission, which issued recommendations on politically painful steps to reduce debt. Lawmakers discarded them. There’s no evidence they’d do anything else today. More

President Biden hailed a rare example of bipartisan cooperation in Washington on Friday, saying in his first prime-time address from the Oval Office that this week’s legislative budget deal averts economic calamity from a default on the nation’s debt.The legislation, known as the Fiscal Responsibility Act, passed the Senate late Thursday after receiving broad support in the House earlier in the week. The bill suspends the debt ceiling for two years and cuts back on spending.Seated behind the Resolute Desk, Mr. Biden said he would soon sign the measure into law and sought to reassure Americans that robust job growth — the economy added 339,000 jobs in May alone — would not be sidetracked by global fears about whether the United States is willing to pay its bills.“Essential to all the progress we’ve made in the last few years is keeping full faith and credit of the United States,” Mr. Biden said, adding: “Passing this budget agreement was critical. The stakes could not have been higher.”The speech was designed to double down on Mr. Biden’s longtime brand as a political deal-maker who is able to reach compromise with his rivals. His advisers believe that reputation is critical to his ability to win a second term in the White House.But Mr. Biden also used his remarks, which lasted about 12 minutes, to highlight achievements by his administration that are fiercely opposed by Republicans, and vowed to continue pushing a Democratic agenda that includes higher taxes on the wealthy, more spending on climate change and veterans and no cuts to health care or the social safety net.“No one got everything they wanted, but the American people got what they needed,” he said. He added that “we protected important priorities from Social Security to Medicare to Medicaid to veterans to our transformational investments in infrastructure and clean energy.”Mr. Biden went out of his way to praise House Speaker Kevin McCarthy, his chief Republican rival.“He and I, we and our teams, we were able to get along, get things done,” Mr. Biden said. “We were straightforward with one another, completely honest with one another and respectful with one another. Both sides operated in good faith.”The president said he would sign the bill on Saturday, two days before the so-called X-date, when the Treasury secretary said the government would run out of cash to pay its bills, a situation that economists have predicted would cause global uncertainty and turmoil.Presidents often reserve the Oval Office for addresses to the nation about war, economic crises or natural disasters. President Ronald Reagan delivered somber remarks from there after the space shuttle Challenger exploded in 1986. President Donald J. Trump announced pandemic restrictions from the Oval Office in early 2020.Mr. Biden’s decision to use the same venue on Friday underscores how close he believes the nation veered toward economic disaster.Mr. Biden and lawmakers had expressed optimism for weeks that they would reach an accord to avoid that outcome, but the deep disagreements between Democrats and Republicans kept the country — and the rest of the world — on edge until the votes were cast in both chambers.In the House, conservative Republicans initially revolted against Mr. McCarthy for failing to win more spending concessions from the president. Several threatened Mr. McCarthy’s speakership, but backed down amid robust support for the speaker from other Republicans.Some Democrats in the House and Senate also resisted the compromise, but the White House made the decision to largely keep quiet as the votes proceeded this week, hoping to avoid inflaming the conservative opposition and making Mr. McCarthy’s job harder.Mr. Biden has said on several occasions that he hoped to find a way to avoid a similar crisis over the debt ceiling in the future and has mentioned the 14th Amendment to the Constitution, which says the debt of the United States “shall not be questioned.”Some legal experts believe that a president could use that passage to ignore the statutory debt limit, thereby avoiding the regular clashes between the parties. Mr. Biden said last month that he hoped to “find a rationale to take it to the courts to see whether or not the 14th Amendment is, in fact, something that would be able to stop it.”On Sunday, he said, “That’s another day.”Before the Oval Office speech, Mr. Biden was faced with anger among some progressives in his party that he had agreed to too many Republican demands during the negotiations.Some Democratic lawmakers voted against the debt ceiling legislation because of new work requirements that it imposes on some recipients of food assistance. White House officials have argued that the legislation removes work requirements for others, including the homeless and veterans.The president also angered some environmentalists by agreeing to approve construction of a natural gas pipeline through West Virginia and Virginia. Critics say the 300-mile Mountain Valley Pipeline will hurt wildlife and the environment as it cuts across the Appalachian Trail.For Mr. Biden, the debt ceiling deal helps to avoid undercutting the strong economy, which is a key selling point for his campaign.But his political advisers also have to be concerned about maintaining support from the coalition of voters who put him in office in 2020, some of whom have been disappointed with his achievements in climate, criminal justice and other areas. More

Employers added 339,000 workers in May, the Labor Department said, though the report also offered signs of shakiness.American employers added an unanticipated barrage of workers in May, reaffirming the labor market’s vigor.Defying expectations of a slowdown, payrolls grew by 339,000 on a seasonally adjusted basis, the Labor Department said on Friday. The increase, the largest since January, suggested that the job market was still piping hot despite a swirl of economic headwinds.But below the surface, the report also offered evidence of softening. The unemployment rate, while still historically low, jumped to 3.7 percent, the highest level since October. In a sign that the pressure to entice workers with pay increases is lifting, wage growth eased.The dissonance offered a somewhat muddled picture that complicates the calculus for the Federal Reserve, which has been raising interest rates for more than a year to temper the labor market’s momentum and rein in price increases. Fed officials have indicated that the jobs report will be an important factor as they decide whether to raise interest rates again.“We’re still seeing a labor market that’s gradually cooling,” said Sarah House, an economist at Wells Fargo. “But it’s at a glacial place.”President Biden hailed the report, saying in a statement that “today is a good day for the American economy and American workers.” The S&P 500 index rose more than 1.4 percent as the data portrayed an economic engine that was running strong but not overheating.Looming over the report is the debt ceiling deal approved by Congress, though economists largely expect the spending caps and cuts to have only marginal impact on the labor market going forward.The hiring numbers suggest that employers remain eager for workers even in the face of high interest rates and economic uncertainty. Many are still bringing on employees to meet consumer demand, especially for services. The only major sectors to lose jobs were manufacturing and information.A slight reversal for manufacturing in MayChange in jobs in May 2023, by sector More

Overall, the unemployment rate among Latinos decreased in May.
Meanwhile, unemployment for Black workers overall increased in May.
The monthly jobs report is made up of two surveys: the payroll survey of employers and the household survey.

Steve Debenport | E+ | Getty Images

The U.S. unemployment rate rose in May, but declined for Hispanic workers, according to the latest nonfarm payrolls report.
The overall unemployment rate last month was 3.7%, a gain of 0.3 percentage points from the prior month. However, Hispanic or Latina women saw their unemployment rate fall to 3.4% last month, down 0.7 percentage points from 4.1% in April, the U.S. Department of Labor reported Friday. The unemployment rate for Hispanic men ticked lower to 4% from 4.1% in April. Overall, the unemployment rate among Latinos decreased to 4% in May from 4.4% in the prior month.

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“This is a historic low,” said Carmen Sanchez Cumming, a research associate at the Washington Center for Equitable Growth, of the overall decline in the Hispanic unemployment rate. “The only other time that it’s been this level was in November 2022 and September of 2019 … For both Hispanic workers and for Black workers, at least in the first half of 2023, this recovery has been especially strong.”
Meanwhile, unemployment for Black workers overall rose 0.9 percentage points to 5.6% in May from 4.7% in April. Among Black men, the rate was 5.6% in May, compared to 4.5% in April. The unemployment rate also ticked higher for Black women, rising to 5.3% in May from April’s rate of 4.4%.

“Economic research and empirical data shows that for Hispanic workers and for Black workers, their outcomes are much more sensitive to fluctuations in the business cycle,” Cumming said. “So, when the labor market is really strong, Latino workers and Black workers benefit disproportionately, but when the labor market is weak, Black and Latino workers [are] hurt disproportionately, too.”

Monthly volatility vs. longer-term trends

The monthly jobs report is made up of two surveys: the payroll survey of employers and the household survey. There is a lot of volatility on a monthly basis that comes into play when looking at smaller demographic groups in the household survey, Cumming warned.
That volatility is the big story in the May jobs report, said Elise Gould, senior economist at the Economic Policy Institute.

“It’s important when we look at something like that to pay attention to the longer-term trend, because every month there can be a lot of movement,” Gould said.
“The longer-term trend suggests that the Black unemployment rate has been coming down,” she added. “So it’s about where it was three months ago. Yes, it was lower last month. It ticked up, but I think that probably it will resolve down again next month.”

The labor force participation rate for the overall population held at 62.6% in May. This metric measures the percentage of people who are either working or actively seeking employment. For Black men, the labor force participation rate ticked up to 68.2%, an increase from 67.8% in April. For Black women, the rate held steady at 63.9%.
Meanwhile, the labor force participation rate for Hispanic men was 79.5% in May, up from 78.9% in April. The rate stayed the same for Hispanic women at 61.2%. More

The Turkish lira has hit a new low, and analysts see few improvements ahead as re-elected President Erdogan pursues unconventional economic policies.Since winning re-election, President Recep Tayyip Erdogan of Turkey has publicly doubled down on his idiosyncratic economic policies.“If anyone can do this, I can do it,” he declared in a victory speech last Sunday, referring to his ability to solve the country’s calamitous economic problems.His brash confidence is not widely shared by most analysts and economists.The Turkish lira dropped to a record low against the dollar this week, and foreign investors have been disheartened by the president’s refusal to stray from what is widely considered to be an eccentric economic course.Instead of combating dizzying inflation by raising interest rates and making borrowing more expensive — as most economists recommend — Mr. Erdogan has repeatedly lowered rates. He argues that cheap credit will boost manufacturing and exports.But his strategy is also fueling inflation, now running at an annual rate of 44 percent, and eroding the value of the Turkish lira. Attempts by the government to prop up the faltering currency have drained the dwindling pool of foreign reserves.As the lira’s value drops, the price of imported goods — like medicine, energy, fertilizer and automobile parts — rises, making it more expensive for consumers to afford daily costs. And it raises the size of debt payments for businesses and households that have borrowed money from foreign lenders.The national budget is also coming under increasing strains. The destructive earthquakes in February that ripped up swaths of southern Turkey are estimated to have caused more than a billion dollars in damage, roughly 9 percent of the country’s annual economic output.At the same time, Mr. Erdogan went on a pre-election spending spree to attract voters, increasing salaries for public sector workers and payouts for retirees and offering households a month of free natural gas. The expenditures pushed up growth, but economists fear that such outlays will feed inflation.President Erdogan in Istanbul last month. Foreign investors have been disheartened by his refusal to stray from what is widely considered to be an eccentric economic course.Sergey Ponomarev for The New York TimesAn effort to encourage Turks to keep their savings in lira by guaranteeing their balances against currency depreciations further adds to the government’s potential liabilities.Critics of the president’s economic approach were somewhat heartened by reports that Mr. Erdogan is expected this weekend to appoint Mehmet Simsek, a former finance minister and deputy prime minister, to the cabinet. Mr. Simsek is well thought of in financial circles and has previously supported a tighter monetary policy.“What Turkey really needs now is more exports and more foreign direct investment, and for that you have to send a signal,” said Henri Barkey, an international relations professor at Lehigh University. One signal could be Mr. Simsek’s appointment, he said.Mr. Barkey argues that Mr. Erdogan will have no choice but to make a U-turn on policy by winter, when energy import costs rise and some debt payments are due.Others are more skeptical that Mr. Erdogan will back down from his insistence that high interest rates fuel inflation. Kadri Tastan, a senior fellow at the German Marshall Fund, a public policy think tank based in Brussels, said that regardless of the cabinet’s makeup, he didn’t believe a policy turnaround was imminent.“I’m quite pessimistic about an enormous change, of course,” he said.To deal with the large external deficit and depleted central bank reserves, Mr. Erdogan has been relying on allies like Russia, Qatar and Saudi Arabia to help bolster its reserves by depositing dollars with the central bank or extending payment deadlines and discounts for imported goods like natural gas.In a note to investors this week, Capital Economics wrote that any optimism about a policy shift is likely to be short-lived: “While policymakers like Simsek would probably pursue more restrained fiscal policy than we had envisaged, we doubt Erdogan would give the central bank license to hike policy rates to restore balance to the economy.”Turkey’s more than $900 billion economy makes it the eighth largest in Europe. And Mr. Erdogan’s efforts to position himself as a power broker between Russia and the European allies since the war in Ukraine began has further underscored Turkey’s geopolitical influence.Mr. Erdogan, who has been in power for two decades, built his electoral success on growth-oriented policies that lifted millions of Turks into the middle class. But the pumped-up expansion wasn’t sustainable.As the lira’s value drops, the price of imported goods rises.Sergey Ponomarev for The New York TimesThe borrowing frenzy drove up prices, spurring a cost-of-living crisis. Still, Mr. Erdogan persisted in lowering interest rates and fired central bank chiefs who disagreed with him. The pandemic exacerbated problems by reducing demand for Turkish exports and limiting tourism, a large source of income.Mr. Erdogan is likely to keep up his expansionary policies until the next local elections take place next year. Until then, Hakan Kara, the former chief economist of the Central Bank of Turkey, said the country would probably just “muddle through.”“Turkish authorities will have to make tough decisions after the local elections, as something has to give in eventually,” Mr. Kara said. “Turkey has to either switch back to conventional policies, or further deviate from the free market economy where the central authority manages the economy through micro-control measures.”“In either case,” he added, “the adjustment is likely to be painful.” More

The incoming president will be under pressure to juggle the global institution’s ambitions to combat climate change and fight poverty.Ajay Banga officially became the 14th president of the World Bank on Friday and urged staff to join him in developing a “new playbook” for a global institution whose relevance has come into question in recent years.The ascension of Mr. Banga to be the next leader of the bank comes at a pivotal moment in its 77-year history. The global pandemic reversed decades of progress in poverty reduction, Russia’s war in Ukraine continues to be a threat to economic stability and the World Bank is under new pressure to become a more ambitious player in the fight against climate change.“Making good on our ambition will require us to evolve to maximize resources and write a new playbook, to think creatively, take informed risks and forge new partnerships with civil society and multilateral institutions,” Mr. Banga wrote in a note to staff that was viewed by The New York Times.Mr. Banga was nominated by President Biden in February after the resignation of David Malpass, the outgoing World Bank president who had been selected by former President Donald J. Trump. The World Bank’s executive board approved Mr. Banga in May following an extensive listening tour that included visits to eight countries and dozens of meetings with government officials around the world.In his message to staff, Mr. Banga defined the bank’s mission as aspiring to “create a world free from poverty on a livable planet.”It is the second part of that mission by which Mr. Banga will be likely be judged.Mr. Malpass left the job a year early after failing to sufficiently demonstrate his commitment to combating global warming amid a renewed emphasis from the Biden administration broadening the bank’s focus on the environment.However, Mr. Banga, a former chief executive of Mastercard, does not bring extensive climate credentials to the job and will be under pressure to demonstrate progress on the bank’s environmental agenda. He has described the tasks of dealing with climate change and poverty as intertwined.“The World Bank’s challenge is clear: It must pursue both climate adaptation and mitigation; it must reach out to lower-income countries without turning its back on middle-income countries; it must think globally but recognize national and regional needs; it must embrace risk but do so prudently,” Mr. Banga wrote in a statement to World Bank’s executive board that accompanied his memo to staff.Activists protest during meetings of the International Monetary Fund and World Bank in April.Yuri Gripas for The New York TimesClimate activists plan to appear outside the World Bank on Friday and attempt to hand postcards to staff with demands that they want Mr. Banga to heed during his first 100 days on the job. They continue to be frustrated that the World Bank finances coal, oil and gas projects despite its pledges to prioritize clean energy projects.Mr. Banga is expected to use his expertise to amplify the resources of the World Bank and build new partnerships between the private and public sectors. The former finance executive added in his memo that accomplishing the World Bank’s many goals will require an annual global investment of trillions of dollars.Mr. Banga will also face a difficult diplomatic task as he seeks to satisfy the climate ambitions of the United States and Europe while facing skepticism from some developing countries. He will also confront the delicate task of urging China, a major World Bank shareholder and creditor, to allow poor countries that have borrowed huge sums from Beijing to restructure their debts.The World Bank president is traditionally chosen by the United States; the managing director of the International Monetary Fund is selected by the European Union.Mr. Banga met on Thursday with Treasury Secretary Janet L. Yellen. They discussed ways to refine how the bank operates and make it more agile and responsive, according to a summary of their conversation released by the Treasury Department. More

Nonfarm payrolls in May increased by 339,000, better than the 190,000 Dow Jones estimate.
The unemployment rate rose to 3.7% in May against the estimate for 3.5%. May’s jobless rate was the highest since October 2022.
Professional and business services led job creation followed by government and health care.

The U.S. economy continued to crank out jobs in May, with nonfarm payrolls surging more than expected despite multiple headwinds, the Labor Department reported Friday.
Payrolls in the public and private sector increased by 339,000 for the month, better than the 190,000 Dow Jones estimate and marking the 29th straight month of positive job growth.

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19 hours ago

The unemployment rate rose to 3.7% in May against the estimate for 3.5%, even though the labor force participation rate was unchanged. The jobless rate was the highest since October 2022, though still near the lowest since 1969.

Average hourly earnings, a key inflation indicator, rose 0.3% for the month, which was in line with expectations. On an annual basis, wages increased 4.3%, which was 0.1 percentage point below the estimate. The average workweek fell by 0.1 hour to 34.3 hours.

Markets reacted positively to the report, with futures tied to the Dow Jones Industrial Average up about 200 points. Treasury yields rose as well.
“The U.S. labor market continues to demonstrate grit amid chaos – from inflation to high-profile layoffs and rising gas prices,” said Becky Frankiewicz, president and chief commercial officer of Manpower Group. “With 339,000 job openings, we’re still rewriting the rule book and the U.S. labor market continues to defy historical definitions.”
May’s hiring jump was almost exactly in line with the 12-month average of 341,000 in a job market that has held up remarkably well in an economy that has been slowing.

Professional and business services led job creation for the month with a net 64,000 new hires. Government helped boost the numbers with an addition of 56,000 jobs, while health care contributed 52,000.
Other notable gainers included leisure and hospitality (48,000), construction (25,000), and transportation and warehousing (24,000).
Despite the big jobs gain, the unemployment rate increased due in large part to a sharp decline of 369,000 in self-employment. That was part of an overall drop of 310,000 counted as employed in the household survey, which is used to calculate the unemployment rate.
An alternative measure of unemployment that encompasses discouraged workers and those holding part-time jobs for economic reasons edged higher to 6.7%.
May’s jobs numbers come amid a challenging time for the economy, with many experts still expecting a recession later this year or early in 2024.
Recent data has shown that consumers continue to spend, though they are dipping into savings and increasingly using credit cards to pay for their purchases. A resilient labor market also has helped underpin spending, with job openings rising back above 10 million in April as employers still find it difficult to fill open positions.
One major potential headache appears to have been eliminated, as warring factions in Washington this week have reached a debt ceiling deal. The agreement is on its way to President Joe Biden’s desk for a signature following passage in the House and Senate this week.
There remain other issues ahead, though.
The Federal Reserve has raised benchmark interest rates 10 times since March 2022 in an effort to fight inflation that hasn’t gone away. In recent days, some policymakers have indicated a willingness to take a break in June from the succession of hikes as they look to see what impact the policy tightening is having on the economy.
However, odds for a June rate hike rose after the jobs report. Traders were pricing in about a 38% chance of another quarter-point increase, according to CME Group data.
Other data points have shown that the manufacturing sector of the economy is in contraction, though the much larger services sector has held in expansion. The ISM manufacturing index released Thursday also showed that prices are pulling back, a positive sign for the Fed. More

Federal Reserve officials have signaled that they could hold rates steady at their upcoming meeting in June — pausing after a string of 10 straight rate increases to give themselves time to see how the economy is shaping up. But Friday’s fresh jobs data is likely to inform policymakers as they try to decide whether this is the right moment to take a break.Central bankers lifted interest rates to a range of 5 to 5.25 percent as of last month, up sharply from near-zero at the start of 2022. But they have been signaling for months that it could soon be appropriate to take a break from increasing rates so that they can assess how the economy is absorbing the big policy changes they have already made and the consequences of other developments, such as the fallout from recent bank turmoil.Higher interest rates cool the economy by making it more expensive to borrow to buy a house or finance a car purchase, but they take time to have their full effect. As rates rise, businesses gradually pull back on expansion plans, slowing hiring, which then feeds into weaker wage growth and a slower economy overall.That is why policymakers are watching job market data to figure out how higher interest rates are working. They have been expecting hiring to slow, wage gains to pull back and unemployment to begin to rise — but that has taken time to play out.Some Fed officials favor holding off on a rate increase in June, allowing more time for them to see how higher borrowing costs and heightened uncertainty are combining to restrain the economy. Patrick T. Harker, the president of the Federal Reserve Bank of Philadelphia, said this week that he is “definitely in the camp of thinking about skipping any increase at this meeting.”Others have underlined that while the Fed may be poised to pause its campaign to cool the economy, that does not mean it is done raising interest rates altogether.“A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle,” said Philip Jefferson, a Fed governor who is President Biden’s pick to be vice chair of the institution, during a speech this week.“Indeed, skipping a rate hike at a coming meeting would allow the Committee to see more data before making decisions about the extent of additional policy firming,” Mr. Jefferson added. The Fed vice chair is traditionally an important communicator for the institution, one who broadcasts how core officials are thinking about the policy path forward.But even as the Fed moves toward a possible pause this month, officials will take into account incoming data on the economy. A key inflation number released last week came in firmer than economists had expected, and officials will receive a fresh Consumer Price Index inflation report the day that their June 13-14 meeting begins.Friday’s jobs report could reinforce — or, if it is abnormally strong, call into question — whether a skip makes sense. More