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The Fed affects jobs and wages
At every meeting, monetary policymakers consider labor market data as they make decisions aimed at achieving maximum employment.
They look at numbers such as:
- Payroll changes.
- Labor force participation rate.
- Duration of unemployment.
The Fed indirectly affects the job market. When it raises the federal funds rate, it tends to slow the economy. That leads to fewer people being hired. They also have less leeway to demand pay raises. This lack of power to bargain for higher wages is seen as a way to fight inflation.