A weakening of the broader job market, which has remained strong through the pandemic recovery, could signal that inflation is cooling off. Investors will get a clearer picture on Friday when the more detailed June jobs report is released.“That’s what the Federal Reserve wants it to do, they're actually thinking that their policies are working because they are increasing slack in the labor markets," said Zachary Hill, head of portfolio management at Horizon Investments.
Investors are trying to determine whether a recession is on the horizon as the Fed aggressively raises interest rates to temper pervasive inflation. Businesses are getting squeezed by higher costs because of supply chain problems and have raised prices on everything from food to clothing. Consumers have been pulling back on spending as inflation puts a tighter squeeze on budgets. Russia's invasion of Ukraine in February sent energy prices surging in 2022, resulting in record gasoline prices in the U.S. Pain at the pump has only worsened the broader impact from inflation, though there are signs that gasoline prices have begun to recede.The key concern is that the Fed's interest rate hikes could go too far in slowing economic growth and actually bring on a recession.
The recession concerns have been weighing heavily on markets. Every major index is in a slump for the year and the benchmark S&P 500 is in a bear market, or down at 20% from its most recent high. The market is not likely going to regain ground until Wall Street gets clearer signals that inflation is cooling.announced that he was resigning amidCopyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
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