The effect of Covid on job numbers could leave Washington in the dark.

Jerome H. Powell, Chairman of the Federal Reserve, compared the setting of monetary policy to stumbling across a poorly lit room: You are cautious as you walk to the door to avoid making a painful mistake. .

The same is likely to happen especially true after Omicron’s messy jobs report in January, as the virus obscured the pace of job market growth and left policymakers in the dark. . But the Fed may lack the luxury of slowly making its way through the tedium this time around.

Mr. Powell and his colleagues preparing to raise interest rates for the first time since 2018 in March, a move aimed at cooling the economy as inflation rose at its fastest pace in nearly 40 years. It would likely be in the uncomfortable position of making that move – and signaling what comes next, as markets are pointing to as many as five rate hikes in 2022 – at a time when… The latest job market data looks lackluster, even the bleakest.

Fed will review virus-hit job market data for several months as officials try to gauge actual strength of economic recovery: Omicron variant has retreated in US and there is little reason to expect an extended lull in hiring after a year of dizzying labor market progress.

However, the virus outbreak and its economic effects represent a likely challenge facing the Fed throughout 2022 as it regains its support. It’s hard to know what will happen next in a business environment full of coronavirus.

“We will be humble and nimble,” Mr. Powell committed to the central bank’s policy line, speaking at a press conference last month.

The Fed typically navigates by looking at upcoming labor market data — particularly, recent unemployment — and inflation data.

But it could take a few months for the jobs picture to clear, and in the meantime, inflation is heating up. Used car price, which has been a big driver of the overall price increase, may be on a steadying track but has not cooled down significantly yet. Gasoline price is returnFood is getting more expensive and rents are going up.

That has the potential to leave the Fed, which often loses its support at times of strong labor markets, to move when the job market is in trouble.

“It’s the Omicron smog,” said Diane Swonk, chief economist at accounting firm Grant Thornton. “It won’t give us visibility.”

Fed officials are trying to make sure they don’t fall behind the curve on high inflation, allowing it to be so locked into consumer and business expectations that it becomes a lasting feature. of the economic context.

How the Fed strikes balance — and how much to slow the economy with rate hikes this year — could also have important political implications. Voters have been confused about the outlook for the economy, and President Biden is suffering in the polls. The effect of Covid on job numbers could leave Washington in the dark.

Fry Electronics Team

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