Charting the global economy: US jobs signal another big Fed hike

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Sustained U.S. job growth and an unemployment rate near a 50-year low have bolstered bets that the Federal Reserve will deliver another sharp interest rate hike this month to curb demand and curb inflation.

Massive hikes were also the theme of the week in other countries, such as Hungary and Pakistan, as policymakers scramble to extinguish price pressures.

Meanwhile, Germany plans to set aside strict borrowing limits next year if Russia cuts off natural gas supplies for an extended period. In Japan, household spending weakened, calling into question the strength of the recovery.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:

A very busy week for central banks saw more than a dozen rate hikes around the world. Big increases were in the majority, with Hungary going for 200 basis points, Pakistan for 125 basis points and eight others for 50 or 100.

Calls for recession are getting louder on Wall Street, but for many households and businesses that make up the global economy, the downturn is already here. The worries of small business owners, consumers and others are illustrated by the so-called misery indices, which mix unemployment and inflation rates.

Each wave of supply shocks hitting the global economy during the pandemic seems to produce a different scapegoat. As the second half of 2022 has just begun, there could still be another supply-side stress culprit: social unrest.

Nearly 400,000 jobs created in one month and an unemployment rate close to its lowest level in 50 years is probably enough proof of the extreme tension of the American labor market. But a look below the surface of the June jobs report and other recent data shows just how hot it really is.

Germany is set to scrap its plan to return to strict borrowing limits next year if Russia permanently halts natural gas deliveries to Europe’s biggest economy, according to people familiar with the matter. . There is a silent agreement among members of Chancellor Olaf Scholz’s coalition cabinet that Berlin cannot stick to its budget plans in the event of an emergency where Russian President Vladimir Putin uses scheduled gas pipeline maintenance Nord Stream as an excuse to end gas flows for a longer period, the people say.

Expectations for inflation, producer prices and pay rises in UK businesses are getting stronger, according to a Bank of England survey, which could convince policymakers to push for stronger interest rate hikes in the coming months.

French President Emmanuel Macron’s resounding success in using public spending to rein in runaway inflation is reaching its limits as the debt burden swells and the loss of a ruling majority limits his ability to act. Growing pressure on the cost of living would also further cloud France’s economic outlook and threaten to rekindle grievances that sparked unrest during Macron’s first term with the so-called yellow vest protests.

Japanese households cut spending in May for the first time in three months, a sign that the economic recovery is proving weaker than previously thought.

Signs are mounting that China’s economy contracted in the second quarter for the first time since 2020, putting the country’s official statistics under fresh scrutiny as analysts bet the government will avoid acknowledging the crisis.

China’s finance ministry plans to allow local governments to sell 1.5 trillion yuan ($220 billion) of special bonds in the second half of this year, an unprecedented ramp-up in infrastructure financing aimed at bolstering the economy besieged country.

Retail price inflation in Thailand accelerated in June to a new 14-year high, bolstering the case for the central bank to raise borrowing costs sooner rather than later. Accelerating inflation strengthens the case for Southeast Asia’s second-largest economy to join central banks around the world in tightening policies aimed at curbing price gains.

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