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Fed's War vs Inflation Could Cost 1.2-M U.S. Jobs: CNN Business

In its effort to bring down historic inflation and cool the economy, the Federal Reserve has used euphemisms to describe the potential impact on US jobs, from economic "pain" to "unfortunate costs" and a "softening labor market." Data, however, don't mince words, Alicia Wallace reported for CNN Business.

Photo Insert: Through the first eight months of 2022, the United States has seen an average net gain of 438,000 jobs per month.

The Fed's latest economic projections, released Wednesday alongside a massive third consecutive interest rate hike of 75 basis points, show that the central bank is expecting the nation's unemployment rate to grow to 4.4% next year -- up from August's 3.7% — and potentially as high as 5%.

Assuming no change in the labor force, that would mean around 1.2 million more people will be unemployed. At the high end of the Fed's range, at 5%, that would be 2.2 million more unemployed.

"There is a gradual realization that the rose-shaded glasses view of being able to reduce labor market tightness by just curbing the number of job openings is gone," said Gregory Daco, chief economist at EY-Parthenon.

"We have now an implicit realization that in order to cool the labor market there will need to be a significant increase in the unemployment rate and there will need to be a cooling of employment growth with potential employment losses."

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Through the first eight months of 2022, the United States has seen an average net gain of 438,000 jobs per month, Bureau of Labor Statistics data shows. In August, 315,000 jobs were added. Prior to the pandemic, the US averaged fewer than 200,000 jobs per month.

Those numbers could go south relatively quickly, Daco said. "I wouldn't be surprised that in an environment where businesses are being more cautious and are applying more discretion to their hiring decisions, that we could see potential net job losses by the end of the year," he said.

Market & economy: Market economist in suit and tie reading reports and analysing charts in the office located in the financial district.

Labor market strength is expected to continue moderating in the coming months, Ataman Ozyildirim, senior director of economics at The Conference Board noted Wednesday in the think tank's latest Leading Economic Index release. The August 2022 index showed a sixth-consecutive month of declines, potentially signaling a recession is imminent, according to The Conference Board.

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