Why the strong job market may be a bad thing for the economy

Federal Reserve crest
(Image credit: JIM WATSON/AFP via Getty Images)

The number of Americans applying for unemployment benefits has decreased since last week, now hovering at a historic low, Bloomberg reports. This comes at a time when job openings in the U.S. rose to 10.7 million in September, and there was also an increase in wages and sector job growth, all of which were expected to fall, CNN reports.

However, this strong job market may not be all good news. Federal Reserve Chair Jerome Powell called the jobs market "overheated" and took measures to cool it by raising interest rates another 0.75 percent. The demand for workers is far exceeding supply with 1.9 jobs available for every person who wants to work, CNN continues. As a result, employers pay higher wages to hold onto workers, which in turn drives up inflation. "Reducing inflation is likely to require a sustained period of below-trend growth and softening of labor market conditions," Powell said Wednesday.

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Devika Rao, The Week US

 Devika Rao has worked as a staff writer at The Week since 2022, covering science, the environment, climate and business. She previously worked as a policy associate for a nonprofit organization advocating for environmental action from a business perspective.