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    Job Openings Fell in June, Suggesting That the Labor Market Is Cooling

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    The number of job openings fell for the third consecutive month in June, a sign that the red-hot U.S. labor market may be starting to cool off.Employers posted 10.7 million vacant positions on the last day of June, the Labor Department said Tuesday. That is high by historical standards but a sharp drop from the 11.3 million openings in May and the record 11.9 million in March. It was the largest one-month decline in the two decades that the government has kept track of this data, other than the two months at the beginning of the coronavirus pandemic in 2020.Job openings are falling, but remain highMonthly U.S. job openings, seasonally adjusted

    Source: Bureau of Labor StatisticsBy The New York TimesThe drop was concentrated in retail, the latest sign that the sector is struggling as consumers shift their spending from goods back to services as the pandemic ebbs. But job postings have also fallen in leisure and hospitality, the sector that was the most strained by labor shortages last year.The job market remains strong by most measures. There were still nearly twice as many job openings as unemployed workers in June, and employers are raising pay and offering other incentives to attract and retain staff. Layoffs remained near a record low in June, suggesting that employers were reluctant to part with staff they worked so hard to hire. And the number of workers voluntarily quitting their jobs remains high, although it has fallen from last year’s peak.The recent decline in openings is likely to be encouraging news for policymakers at the Federal Reserve, who have been trying to slow down the economy in an effort to tame inflation. Jerome H. Powell, the Fed chair, and other officials have pointed to the number of vacant jobs as evidence that the labor market is too hot. They are hoping that employers will start posting fewer jobs and hiring fewer workers before they begin laying people off, allowing the job market to cool down without causing a spike in unemployment.Still, any slowdown in the job market will mean that workers have less leverage to demand raises when pay is already failing to keep up with inflation. Slower wage growth, in turn, could lead consumers to spend less, increasing the risk that the United States could slip into a recession.The labor market “is definitely losing momentum, and that’s what is chipping away at people’s ability to spend,” said Tim Quinlan, a senior economist for Wells Fargo.Economists and policymakers will get a more up-to-date picture of the job market on Friday, when the Labor Department releases data on hiring and unemployment in July. Forecasters surveyed by FactSet expect the report to show that employers added about 250,000 jobs last month, down from 372,000 in June. More

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    Fed’s Kashkari says officials are ‘a long way’ from backing off inflation fight.

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    Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, suggested on Friday that markets had gotten ahead of themselves in anticipating that the central bank — which has been raising interest rates swiftly this year — would soon begin to back off.“I’m surprised by markets’ interpretation,” Mr. Kashkari said in an interview. “The committee is united in our determination to get inflation back down to 2 percent, and I think we’re going to continue to do what we need to do until we are convinced that inflation is well on its way back down to 2 percent — and we are a long way away from that.”Fed officials raised interest rates by three-quarters of a percentage point this week, their second consecutive supersize rate increase and a move that took their policy setting to a range of 2.25 to 2.5 percent. That’s roughly what policymakers think of as a neutral setting, one that neither stokes nor slows growth, and further increases in interest rates will begin to actively hit the brakes on the economy.Given that fact, Jerome H. Powell, the Fed chair, said policymakers would now set rates meeting by meeting rather than committing to a broad plan well in advance. Investors took that as a sign that the central bank was likely to slow rate moves sharply in the coming months as the economy slows. In fact, bond market pricing suggests that investors think officials may even begin to cut interest rates next year.“I don’t know what the bond market is looking at in reaching that conclusion,” Mr. Kashkari said, adding that the bar would be “very, very high” to lower rates.Mr. Kashkari said that it was too soon to know how big of a rate increase might be appropriate in September, but that raising rates by half a point at coming Fed meetings “seems reasonable” to him.He noted, however, that inflation data had been surprising “in a bad way” and that continued higher core inflation could push him to think a three-quarter-point move would be needed. (Core inflation strips out volatile fuel and food prices to get a sign of underlying inflation pressures.)The difficult question to answer, Mr. Kashkari said, is how high interest rates will need to rise to wrestle inflation back down.“How much are we going to have to do to break the cycle of inflation and get inflation well on its way back down?” Mr. Kashkari said. “Nobody knows that.”But, he added, “We know we have a job to do, and we’re committed to doing it.” More

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    Pay growth and prices picked up, keeping the Fed on track for rate increases.

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    Wages, prices and consumer spending all continued to climb, the latest government data showed Friday — fresh evidence that the economy remains resilient amid fear of a recession, but also that inflation is likely to remain a vexing problem for the Federal Reserve.Consumer prices climbed 6.8 percent over the year through June, according to the Fed’s preferred inflation gauge, the Personal Consumption Expenditures measure. That was the fastest pace since 1982. Consumer spending rose even faster than prices, though, as Americans shelled out money for cars, vacations and restaurant meals even as higher gas and grocery bills strained household budgets.Meanwhile, paychecks grew briskly, albeit not enough to keep up with inflation. The Employment Cost Index for the second quarter rose 5.1 percent from a year earlier.Taken together, the data released Friday indicated that the consumer economy has retained momentum in the face of the highest inflation in decades. That should ease concerns that an economic downturn has already begun but, paradoxically, could also make future economic pain more likely: Strong demand will put continued upward pressure on prices, potentially forcing the Fed to react more aggressively to cool demand and bring inflation under control.Central bank officials on Wednesday made their second supersize rate increase in a row — three-quarters of a percentage point — as they try to slow down the economy by making money more expensive to borrow. They have signaled that they will closely watch incoming economic readings as they consider whether to make another giant move at their next meeting in September, and a number of economists said Friday’s data were likely to prod the officials toward continued decisive action.“This is a print that’s going to keep Fed officials up at night,” Omair Sharif, founder of Inflation Insights, wrote in reaction to the fresh wage data. “The monthly inflation and activity data are going to have to cooperate in a very big way for the Fed to step down.”Jerome H. Powell, the Fed chair, said during his news conference this week that officials could raise interest rates three-quarters of a point again, though he did not commit to such a move. The Fed has nearly two months, and a lot of economic data to parse, between now and its next rate decision.Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said in an interview on Friday that raising rates half a point at upcoming meetings “seems reasonable” to him. But he noted that inflation data had been surprising “in a bad way” and said that if core inflation remained high, it could push him to think a three-quarter point move was needed.“It continues to be concerning,” Mr. Kashkari said of the data released Friday. “I’m waiting for some good news to come: Some surprises that, oh, inflation was lower than we were expecting.”As rapid price increases challenge the Fed, they are also dogging the White House, which called Friday’s inflation numbers “too high.”What the Fed’s Rate Increases Mean for YouCard 1 of 4A toll on borrowers. More

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    Prices surged in June and pay growth, while brisk, is struggling to keep up.

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    Prices climbed by 6.8 percent in the year through June, the Federal Reserve’s preferred inflation gauge showed, and even a measure that strips out food and fuel picked up notably on a monthly basis.Inflation as measured by the Personal Consumption Expenditures index jumped by 4.8 percent over the past year after stripping out food and fuel, which economists do to get a sense of underlying trends, a slightly larger increase than the 4.7 percent increase economists in a Bloomberg survey had expected.Those data are likely to keep the central bank on track to raise rates more as it tries to cool down the fastest inflation in decades. Fed officials made their second supersized rate increase in a row — three-quarters of a percentage point — this week as they try to slow down the economy by making money more expensive to borrow.A separate report showed that wages climbed briskly. The Employment Cost Index climbed by 5.1 percent in the second quarter compared to the same period last year, and the index’s measure of wages and salaries also picked up.While most people are not seeing their pay climb quickly enough to keep pace with rapidly rising prices, wage growth is proceeding rapidly enough that they might make it difficult for price increases to moderate back toward the Fed’s 2 percent annual target. Companies are unlikely to stop raising prices when their labor bills are increasing rapidly, because doing so would eat into and possibly wipe out their profits.The combination of very quick price increases and brisk pay growth is likely to keep the Fed in inflation-fighting mode. Jerome H. Powell, the Fed chair, said during his news conference this week that officials could raise interest rates by three-quarters of a point again at their next meeting in September, though he did not commit firmly to such a move, given that the Fed has nearly two months between now and their next rate decision.Headline inflation probably cooled in July, because gas prices have dropped sharply this month. It is not yet clear how durable the change will prove, though, and central bankers and consumers have been watching prices increase across a broad array of goods and services beyond just fuel.Inflation has been high for more than a year, and central bankers are focused on trying to restrain demand and drive it lower before it becomes ingrained in the American economy. Once consumers and businesses have learned to expect and accept rapid price increases, it may be harder to quash them.“I really do think that it’s important that we address this now and get it done,” Mr. Powell said at his news conference this week, later adding that “we are assigned uniquely and unconditionally the obligation of providing price stability to the American people. And we’re going to use our tools to do that.” More

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    Federal Reserve Makes Another Supersized Rate Increase to Tame Inflation

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    The central bank raised rates by three-quarters of a percentage point and suggested additional large increases could be warranted.The Federal Reserve chair, Jerome H. Powell, spoke to reporters after officials met to raise rates.Jim Lo Scalzo/EPA, via ShutterstockWASHINGTON — The Federal Reserve continued its campaign of rapid interest rate increases on Wednesday, pushing up borrowing costs at the fastest pace in decades in an effort to wrestle inflation under control.Fed officials voted unanimously at their July meeting for the second supersized rate increase in a row — a three-quarter-point move — and signaled that another large adjustment could be coming at their next meeting in September, though that remains to be decided. The decision on Wednesday puts the Fed’s policy rate in a range of 2.25 to 2.5 percent.The central bank’s brisk moves are intended to slow the economy by making it more expensive to borrow money to buy a house or expand a business, weighing on the housing market and economic activity more broadly. Jerome H. Powell, the Fed chair, said during a news conference after the meeting that such a cool-down was needed to allow supply to catch up with demand so that inflation could moderate.Mr. Powell acknowledged that the Fed’s policy changes were likely to inflict some economic pain — in particular, weakening the labor market. That has made the central bank’s rate increases unwelcome among some Democrats, who argue that crushing the economy is a crude way to lower today’s inflation rate. But the Fed chair stressed that the economic sacrifice today was necessary to put America back on a sustainable longer-term path with slow and predictable price increases.“We need growth to slow,” Mr. Powell said. “We don’t want this to be bigger than it needs to be, but ultimately, if you think about the medium- to longer term, price stability is what makes the whole economy work.”Stocks surged after the Fed’s decision and Mr. Powell’s news conference. Some rates strategists asked why, because Mr. Powell’s comments aligned with the message Fed officials have consistently sent: Inflation is too high, the central bank is determined to crush it, and interest rates are likely to further increase this year.“There’s a lot of information between now and the September meeting, and I think markets will reassess,” said Priya Misra, head of Global Rates Strategy at TD Securities. “This is an even more data-dependent Fed — and it is going to come down to whether inflation gives them the space to slow down.”The Fed began raising interest rates from near-zero in March, and policymakers have picked up the pace sharply since in reaction to incoming economic data, as price increases have continued to accelerate at an alarming rate.After making a quarter-point move to start, the central bank raised rates by half a point in May and by three-quarters of a point in June, which was the largest single step since 1994. Officials could keep raising rates briskly in September, or they could ease off the pace, depending on how the economy evolves.“We might do another unusually large rate increase,” Mr. Powell said on Wednesday. “But that is not a decision we have made at all.”What the Fed’s Rate Increases Mean for YouCard 1 of 4A toll on borrowers. More

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    How Will Interest Rate Increases Impact Inflation?

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    The Federal Reserve is raising interest rates to fight inflation. Some economists want more; some politicians want less. What’s the logic?The Federal Reserve is expected to announce its fourth interest rate increase of 2022 on Wednesday as it races to tamp down rapid inflation. The moves have a lot of people wondering why rate increases — which raise the cost of borrowing money — are America’s main tool for cooling down prices.Senator Elizabeth Warren, the Massachusetts Democrat, wrote an opinion piece in The Wall Street Journal on Sunday arguing that the Fed’s demand-crushing rate increases are not the right policy to fight today’s inflation as fuel costs and supply chain turmoil push up prices. The policies will hurt workers, she said, and “it doesn’t have to be this way.”Others have argued that the Fed should continue to be forceful. Lawrence H. Summers, the former Democratic Treasury secretary, argued during an interview on CNN this week that the Fed needed to take “strong action” to control inflation and that allowing inflation to gallop out of control would be the “bigger mistake” than causing a recession.Onlookers could be excused for struggling to make sense of the debate. Fed officials themselves acknowledge that their tools are blunt, that they cannot fix broken supply chains and that it will be difficult to slow the economy enough without causing an economic downturn. So why is the Fed doing this?America’s central bank has for decades been what Paul Volcker, its chair in the 1980s, called “the only game in town” when it comes to fighting inflation. While there are things that elected leaders can do to combat rising prices — raising taxes to curb consumption, spending more on education and infrastructure to improve productivity, helping flailing industries — those targeted policies tend to take time. The things that elected policymakers can do quickly generally help mainly around the edges.But time is of the essence when it comes to controlling inflation. If price increases run fast for months or years on end, people begin to adjust their lives accordingly. Workers might ask for higher wages, pushing up labor costs and prompting businesses to charge more. Companies might begin to believe that consumers will accept price increases, making them less vigilant about avoiding them.By making money more expensive to borrow, the Fed’s rate moves work relatively quickly to temper demand. As buying a house or a car or expanding a business becomes pricier, people pull back from doing those things. With fewer consumers and companies competing for the available supply of goods and services, price gains are able to moderate.Unfortunately, that process could come at a hefty cost at a moment like this one. Bringing the economy into balance when supply is constrained — cars are hard to find because of semiconductor shortages, furniture is on back order, and jobs are more plentiful than laborers — could require a big decline in demand. Slowing the economy down that meaningfully could tip off a recession, leaving workers unemployed and families with lower incomes.Economists at Goldman Sachs, for example, estimate that the probability of a recession over the next two years is 50 percent. Already, signs abound that the economy is slowing as the Fed begins to push rates higher, with overall growth data, housing market trackers and some metrics of consumer spending showing a pullback.But central bankers believe that even if the risks are difficult to bear, they are necessary. A downturn that pushes unemployment higher would undoubtedly be painful, but inflation is also a major impediment for many families today. Getting it under control is critical to putting the economy back on a sustainable path, officials argue.“It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all,” Jerome H. Powell, the Fed chair, said at his news conference last month. More

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    How U.S. Inflation Expectations Are Being Shaped by Consumer Choices

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    How Bacon and Costco Fish Shape America’s View of InflationEconomic policymakers are razor focused on inflation expectations after more than a year of rapid price increases. Consumers explain how they’re thinking about rising costs.Jeanna Smialek and July 27, 2022Inflation started in the bacon aisle for Dan Burnett, a 58-year-old former medical center administrator who lives in Margaretville, N.Y.Last summer, he began to notice that the breakfast staple was increasing sharply in price, jumping to $10 from $8 per pack at his local grocer. Before long, a wide variety of food products were more expensive — so many that he began driving 45 miles to shop at Aldi and Walmart, hoping to score better deals. This summer, it seems that inflation is across the board, pushing up prices on brake repair, hotel rooms and McDonald’s fries.“My biggest fear is that they don’t get it under control, and that it just persists,” Mr. Burnett said. He is thinking about how he might have to reshape his financial future in a world where prices — which had long increased at a rate of 2 percent or less per year — now climb by considerably more.“Once people get this mind-set of ‘You can increase prices and people will just pay it,’ you’re off to the races.” Dan BurnettPeople like Mr. Burnett, who is beginning to believe that America’s price burst might last, are the Federal Reserve’s biggest fear. If consumers and companies expect fast inflation to be a permanent feature of the American economy, they might begin to shift their behavior in ways that cause prices to keep rising. Consumers might begin to accept price increases without shopping around, workers might demand higher pay to cover climbing costs, and businesses might raise prices both to cover their higher labor bills and because they think customers will stomach the heftier price tags.Economists often blame that sort of spiraling inflationary mind-set for fueling rapid price gains in the 1970s and 1980s, a painful episode in which inflation proved difficult to tame. That is why the Fed, which is responsible for keeping inflation under control, has been focusing on a range of inflation expectation measures, hoping that a high-price psychology is not taking hold.Most signs suggest that people still believe that inflation will fade with time. But interpreting inflation expectations is more art than science: Economists disagree about which metrics matter, how to measure them and what could make them change. And after more than a year of rapid price increases, central bank officials are increasingly worried that it’s foolish to take the stability of price expectations for granted. Officials have been rapidly raising interest rates to try to cool the economy and send a signal to the public that they are serious about wrestling price increases lower.“There’s a clock running here, where we have inflation running now for more than a year,” Jerome H. Powell, the Fed chair, said recently. “It would be bad risk management to just assume those longer-term inflation expectations would remain anchored indefinitely in the face of persistent high inflation. So we’re not doing that.”Central bankers closely watch measures including the University of Michigan’s longer-term inflation outlook survey as they try to judge whether expectations remain under wraps. Those have moved up since 2020, but have not jumped by as much as actual inflation. Still, those trackers show only where expectations are today. They say little about when they might change or what might shift them. To get a more detailed, qualitative sense of how consumers are thinking about inflation, The New York Times asked readers what costs were sticking out to them, how much inflation they expected and how they were forming that opinion. The takeaway: While many people still expect inflation to ease with time, that assumption is a fragile one as many Americans experience the fastest inflation of their adult lives across a broad range of goods and services.Grocery and gas prices are weighing heavily on many people’s minds, consistent with research about how consumers form price expectations. But the particular products raising eyebrows vary widely and expand beyond just food and gas.Guitars, rent and pedicures are getting more expensive in California. Artisan crafts are commanding higher prices in New Mexico.Pedicures are getting more expensive in California.People are coping with the climbing costs in a range of ways. Many said they were cutting consumption, which could help inflation to ease by lowering demand and giving supply a chance to catch up. A few were continuing to buy, hoping that costs would moderate with time. But others were asking for more pay or trying to find other ways to cover their climbing costs while resigning themselves to increasing prices.For Siamac Moghaddam, a 37-year-old who is in the Navy and lives in San Diego, dealing with inflation has been less about cutting down on little things — like the pedicures he enjoys getting, since he is in boots all the time — and more about saving on big expenses, like rent. His landlord recently raised his apartment rent by $200, so he moved out of his two bedroom and into a one bedroom.“Everyone’s adjusting,” he said. He thinks the Fed’s rate increases will bring inflation under control, though in the process, “I think we’re going to suffer economically.”Robert Liberty, 68 and from Portland, Ore., is trying to save on food and travel.“I reached for an avocado in the store, and I jerked back my hand like it was about to be burned when I saw the price — it was $5.50 per avocado,” said Mr. Liberty, a part-time lawyer and consultant whose husband works full time. He thinks inflation will moderate, though he’s unsure how much. For now, an avocado, he said, is “one thing we can do without.”“I quit Starbucks. I had to. I just didn’t feel like that was justifiable. It’s like a small car payment.” Fontaine WeymanFontaine Weyman, a 43-year-old songwriter from Charleston, S.C., is more toward the middle of the inflation-expectations range. Ms. Weyman delivers for Instacart and, with her husband, has a household income of around $80,000. Starbucks has always been her personal indulgence, but she’s cutting it out.“It’s $6.11 for just a Venti iced coffee with a little bit of cold foam on top — that’s like $180 a month,” Ms. Weyman said. While she still believes inflation will fade with time, she and her husband are thinking about how to increase their household income in case it doesn’t.“We know that he’ll most likely get a 5 to 10 percent raise anyway in March, but I’ve asked him to ask for 15 percent,” she said.That pattern — cutting back and hoping for the best but also planning for a possible higher-inflation future — is the one Susan Hsieh is embracing as she watches costs at Costco climb. Ms. Hsieh lives in Armonk, N.Y., with her husband and two teenage children, and has cut back on buying frozen Chilean sea bass fillets as they jump sharply in price, which is sad news for her family.“That fish is really tasty,” she said.Chilean sea bass has become more expensive at Costco.Rising costs across goods and services have also prompted Ms. Hsieh, who works at a branch of the United States Treasury, to ask for higher pay this year. She knew the 2.2 percent raise she was going to get as a typical cost-of-living adjustment was not going to keep up with inflation. She ended up just shy of a 5 percent raise.“I think I’m going to ask again,” she said of her salary negotiation this coming year, assuming inflation sticks around.Mr. Burnett, buyer of bacon, might offer the clearest illustration of why expectations for faster inflation could spell trouble for the Fed if they begin to take hold in earnest. For him, the breadth of today’s price changes makes it hard to believe that inflation will fade soon.Mr. Burnett, who is retired, is thinking about adapting his life accordingly. He co-owns a condominium in Florida with his sister, and maintenance fees on the unit are going up. Though he rents the condo to tenants for only part of the year, he’s likely to pass the full increase onto them.He likes the tenants and doesn’t want to raise rents by so much that he pushes them out, but he could also see himself and his sister charging even more if they notice that neighboring landlords are pushing prices higher.“I really want to make sure that I’m maximizing income,” he said, given the inflation. And he thinks other people will do the same, which is what makes him think inflation is unlikely to fade soon. “Once people get this mind-set of ‘You can increase prices and people will just pay it,’ you’re kind of off to the races.” More

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    Strong Wage and Jobs Growth Keeps Fed on Track for Big Rate Increase

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    The Federal Reserve is trying to cool down the economy to bring inflation under control, but the job market is still going strong.A surprisingly robust June employment report reinforced that America’s labor market remains historically strong even as recession warnings reach a fever pitch. But that development, while good news for the Biden administration, is likely to keep the Federal Reserve on its aggressive path of interest rate increases as it tries to cool the economy and slow inflation.Today’s world of rapid price increases is a complicated one for economic policymakers, who are worried that an overheating job market could exacerbate persistent inflation. Instead of viewing roaring demand for labor as an unmitigated good, they are hoping to engineer a gradual and controlled slowdown in hiring and wage growth, both of which remain unusually strong. Friday’s report offered early signs that the desired cooling is taking hold as both job gains and pay increases moderated slightly. But hiring and earnings remained solid enough to reinforce the view among Fed officials that the labor market, like much of the economy, is out of whack: Employers still want far more workers than are available. The new data will likely keep central bankers on track to make another supersize rate increase at their meeting later this month as they try to restrain consumer and business spending and force the economy back into balance. “We’re starting to see those first signs of slowdown, which is what we need,” Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said in a CNBC interview after the report was released. Still, he called the wage data “only slightly” reassuring and said that “we’re starting to inch in the right direction, but there’s still a lot more to do, and a lot more we’ll have to see.”Fed officials began to raise interest rates from nearly zero in March in an attempt to make borrowing of many kinds more expensive. Last month, the central bank lifted its policy rate by 0.75 percentage points, the largest single increase since 1994. Central bankers typically adjust their policy only in quarter-point increments, but they have been picking up the pace as inflation proves disturbingly rapid and stubborn. While Fed policymakers have said they will debate a move between 0.5 or 0.75 percentage points at their meeting on July 26 and 27, a chorus of officials have in recent days said they would support a second 0.75 percentage point move given the speed of inflation and strength of the job market.As the Fed tries to tap the brakes on the economy, Wall Street economists have warned that it may instead slam it into a recession — and the Biden administration has been fending off declarations that one is already arriving. A slump in overall growth data, a pullback in the housing market and a slowdown in factory orders have been fueling concern that America is on the brink of a downturn. Construction workers in New York City. Employers added 372,000 workers in June.Hiroko Masuike/The New York TimesThe employment data powerfully contradicted that narrative, because a shrinking economy typically does not add jobs, let alone at the current brisk pace. Mr. Biden celebrated the report on Friday, saying that “our critics said the economy was too weak” but that “we still added more jobs in the past three months than any administration in nearly 40 years.”Private sector voices concurred that the employment report showed an economy that did not appear to be tanking. “Wage growth remains elevated and rates of job loss are low,” Nick Bunker, economic research director at the job website Indeed, wrote in a reaction note. “We’ll see another recession some day, but today is not that day.”The State of Jobs in the United StatesJob gains continue to maintain their impressive run, easing worries of an economic slowdown but complicating efforts to fight inflation.June Jobs Report: U.S. employers added 372,000 jobs and the unemployment rate remained steady at 3.6 percent ​​in the sixth month of 2022.Care Worker Shortages: A lack of child care and elder care options is forcing some women to limit their hours or has sidelined them altogether, hurting their career prospects.Downsides of a Hot Market: Students are forgoing degrees in favor of the attractive positions offered by employers desperate to hire. That could come back to haunt them.Slowing Down: Economists and policymakers are beginning to argue that what the economy needs right now is less hiring and less wage growth. Here’s why.The contradictory moment in the economy — with prices rising fast, economic growth contracting and the unemployment rate hovering near a 50-year low — has posed a challenge for Mr. Biden, who has struggled to convey sympathy for consumers struggling with higher prices while seeking credit for the strength of the jobs recovery. Mr. Biden’s approval ratings have slumped as price growth has accelerated. Confidence has taken an especially pronounced battering in recent months amid rising gas prices, which topped $5 a gallon on average earlier this summer. On Friday, Mr. Biden emphasized that fighting inflation was his top economic priority while also praising recent job market progress. “I know times are tough,” Mr. Biden said, speaking in public remarks. “Prices are too high. Families are facing a cost-of-living crunch. But today’s economic news confirms the fact that my economic plan is moving this country in a better direction.” But unfortunately for the administration and for workers across America, tackling high prices will probably come at some cost to the labor market. As price increases bedevil consumers at the gas pump and in the grocery aisle, the Fed believes that it needs to bring inflation under control swiftly in order to set the economy on a path toward healthy and sustainable growth. The Fed’s tool to achieve that positive long-term outcome works by causing short-term economic pain. By making money expensive to borrow, the central bank can slow down home buying and business expansions, which will in turn slow hiring and wage increases. As companies and families have fewer dollars to spend, the theory goes, demand will come into better alignment with supply and prices will stop rocketing higher. Officials expect unemployment to eventually tick up as rate increases bite and the economy weakens, though they are hoping that it will only rise slightly. Fed policymakers are still hoping to engineer what they often call a “soft landing,” in which hiring and pay gains slow gradually, but without plunging the economy into a painful recession. But pulling it off will not be easy — and officials are willing to clamp down harder if that is what it takes to tame inflation. “Price stability is absolutely essential for the economy to achieve its potential and sustain maximum employment over the medium term,” John C. Williams, the president of the Federal Reserve Bank of New York, said in a speech in Puerto Rico on Friday. “I want to be clear: This is not an easy task. We must be resolute, and we cannot fall short.”Federal funds rate since January 1998

    Rate is the federal funds target rate until Dec. 15, 2008, and thereafter it is the upper limit of the federal funds target rate range.Source: The Federal ReserveBy The New York TimesStocks fell after the release of the employment numbers, likely because investors saw them as a sign that the Fed would continue constraining the economy.“The tremendous momentum in the economy to me suggests that we can move at 75 basis points at the next meeting and not see a lot of protracted damage to the broader economy,” Mr. Bostic said Friday.Fed officials are closely watching wage data in particular. Average hourly earnings climbed by 5.1 percent in the year through June, down slightly from 5.3 percent the prior month. Wages for non-managers climbed by a swift 6.4 percent from a year earlier. While that pace of increase is slowing somewhat, it is still much higher than normal — and could keep inflation elevated if it persists, as employers charge more to cover climbing labor costs.“Wages are not principally responsible for the inflation that we’re seeing, but going forward, they would be very important, particularly in the service sector,” Jerome H. Powell, the Fed chair, said at his news conference in June.“If you don’t have price stability, the economy’s really not going to work the way it’s supposed to,” he added later. “It won’t work for people — their wages will be eaten up.”Wage growth may be slowing in retail and hospitality jobs.Percent change in earnings for nonmanagers since January 2019 by sector More