Jobs data adds to Fed’s July rate hike puzzle.

By Howard Schneider

WASHINGTON (Reuters) – U.S. Federal Reserve officials parsing whether to follow through with an expected interest rate increase later this month will receive key data Friday when a new count of payroll jobs for June is released along with data on wages and the unemployment rate.

The labor market remains a crucial factor for the U.S. Federal Reserve as it considers an interest rate increase. While inflation has been a primary concern, the progress of the labor market is equally important in the Fed’s goal of balancing policy to lower inflation without negatively impacting workers.

Surprisingly, job and wage growth have been stronger than expected despite the rate increases. The unemployment rate rose slightly in May but remains low, and companies have continued to add workers and increase pay.

Economists predict that around 225,000 payroll jobs were added in June, but there is a possibility of an upside surprise after a report indicated higher-than-expected job additions by private employers.

Average hourly wages have been growing at a pace above the level consistent with the Fed’s inflation target, indicating a tight labor market. However, there are signs that the supply and demand for workers are coming into better balance.

While there are concerns about a possible economic downturn, the number of open jobs has been falling but remains higher than pre-pandemic levels.

(Reporting by Howard Schneider; Editing by Dan Burns and Nick Zieminski)

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