The US snapped its hiring hot streak in June, a weakening that will complicate the Federal Reserve’s path forward on interest rates.
Employers added 57,000 jobs last month, about half of what economists had expected. That puts more pressure on new Fed Chair Kevin Warsh and his colleagues, a dissent-happy bunch over the past year, to consider whether a slowdown in jobs or an uptick in inflation is the bigger risk to the economy.
Warsh in June hinted that he sees bringing inflation under the Fed’s 2% goal as the priority, saying “this committee will deliver price stability.” That would favor keeping interest rates high, or even raising them — the market is pricing in at least one rate hike by the end of the year — while protecting a weakening jobs market generally requires cutting borrowing costs to spur businesses to grow.
AI complicates the Fed’s playbook even further. Business growth used to mean hiring more people; now it might just mean buying more tokens. And spreading that economic boom beyond a handful of AI companies is quickly becoming a national priority, as the White House weighs taking stakes in frontier labs and politicians float new ways to tax them.
