Upwards of 1 million Americans could lose their jobs due to interest rate hikes

AP Photo/Manuel Balce Ceneta

The U.S. Federal Reserve’s efforts to combat inflation through interest hikes threaten to “destroy” at least 1 million jobs, economists warn.

Last week, the central bank approved the third straight 75 basis point rate hike and released quarterly economic forecasts showing that they anticipate unemployment to surge in the months ahead. Speaking at a press conference following the meeting, Fed chairman Jerome Powell said that higher interest rates could “give rise to unemployment.”

"We think we need to have softer labor market conditions," Powell stated. "And if we want to set ourselves up really light the way to another period of a very strong labor market, we have got to get inflation behind us. I wish there were a painless way to do that. There isn't." 

According to Fox Business, the updated projections showed unemployment rising to a staggering 4.4% by the end of next year, up from the current rate of 3.7%.

In basic terms, an unemployment rate of 4.4% is equal to around an additional 1 million job losses, per calculations from RSM chief economist Joe Brusuelas. If the rate hits 4.6%, that figure could go up to at least 1.7 million. 

Fox Business reported:

The Fed's projections, known as the dot plot, show that a handful of the 16 Fed officials believe the most aggressive tightening in decades will actually force unemployment even higher, with the jobless rate eventually hitting 5%.

For months, the labor market has remained one of the few bright spots in the economy, with the economy adding more than 2 million jobs over the first half of the year. Additionally, the government reported earlier this month that job openings climbed past 11.2 million — meaning there are roughly two available jobs per worker.

However, there are signs that the labor market is starting to weaken, with a plethora of companies, including Alphabet's Google, Walmart, Apple, Meta and Microsoft, announcing hiring freezes or layoffs in recent weeks.