Minnesota labor market could spell trouble for Fed rate hike policy
Federal Reserve Chair Jerome Powell signaled in March that the Federal Reserve “may” implement at least one more rate hike this year. Experts believe that could come on Wednesday after the May meeting of the Federal Open Market Committee concludes. After that, the vast majority see rates staying at the 5%-5.25% range through the end of the year.
However, some don’t rule out that macroeconomic data may force the US central bank to increase rates even more. Minnesota may be a harbinger of such economic forces.
Businesses in the state are taking extraordinary measures to attract new workers and retain the ones that they have. Like the US as a whole, there are far more jobs available than able-bodies to fill them. While nationally there are 1.7 jobs for each of the 5.9 million unemployed jobseekers, in the Land of Ten Thousand Lakes there are 2.6. Both numbers have come down in recent months, but they remain well-above pre-pandemic levels.
Policymakers at the Federal Reserve was to see the tight labor market loosen as a result of their increasing the cost of borrowing. Ideally, the demand for workers would shrink without causing mass unemployment, but companies so far are still trying to hire scores of new employees.
Wages is another factor being considered by the Fed. In the case of Minnesota, Daikin jacked its starting wage from $17 per hour to $24 and its US chief executive Jeff Drees says it still needs 200 more employees at its two facilities in the state. He doesn’t see wage growth levelling off any time soon.
