The U.S. economy probably continued to create jobs at a rapid rate in March, despite Federal Reserve interest rate hikes dampening demand.economy probably continued to create jobs at a rapid clip in March.
The closely watched employment report from the Labor Department on Friday, which is also anticipated to show that the unemployment rate remained unchanged at 3.6% and that there were only modest wage increases in the previous month, is likely to be welcomed by officials at the U.S. central bank as they consider whether to end their fastest rate hike cycle since the 1980s. On a day when the majority of financial markets are closed for the Good Friday holiday, the report will be released at 8:30 a.m. EDT (1230 GMT).
It would be premature for the employment report to reflect the financial market stress brought on by the failure of two U.S. regional banks in March, as it is with the majority of recent economic statistics.
At Wells Fargo in Charlotte, North Carolina, senior economist Sarah House said, “We’re still looking at figures that are still fairly solid.” “We continue to have extremely high inflation. We anticipate that the Fed will raise rates one more time in May, marking the end of this cycle.”
According to a Reuters survey of economists, nonfarm payrolls likely grew by 239,000 in a month. Despite the fact that it would be the weakest increase since December 2020, employment growth would still be greater than the 100,000 jobs per month that experts estimate are required to keep up with the rise in the working-age population.
In February, the economy created 311,000 new employment. The hiring boost from the abnormally mild weather in January and February is said to have faded, which is responsible for a portion of the predicted decline.
government statistics showed that guy was unemployed that month.
Forecasts varied between 150,000 and 342,000, with downside risks predominating. Weekly claims and continuing claims data from the Labor Department’s annual adjustments, which were released on Thursday, both underwent sizable improvements. The revisions, according to economists, brought the claims series more closely in line with other statistics that suggested the labour market was slowing down.
This week, surveys from the Institute for Supply Management provided a pessimistic analysis of the job situation. At the end of February, there were fewer than 10 million job opportunities for the first time in almost two years, but there were still 1.7 positions for every worker.
This week, surveys from the Institute for Supply Management provided a pessimistic analysis of the job situation.
THE FED’S HALT ON RATE HIKES SPELLS TROUBLE FOR LABOUR MARKET
The Federal Reserve’s recent decision to pause further interest rate hikes has raised concerns about the health of the labour market. After hiking its policy rate by a staggering 475 basis points since last March, the Fed indicated that it may put future rate hikes on hold due to financial market stress.
However, the pause may be too little too late. Average hourly earnings are forecast to rise only 0.3% in March, lowering the annual increase in wages to 4.3%, still too high to be consistent with the Fed’s 2% target. The labour market is expected to suffer further as companies begin to respond to a slowdown in demand caused by higher borrowing costs.
Credit conditions have also tightened, making it harder for small businesses and households to access funding. Small businesses, the main drivers of job growth since the pandemic recovery, will likely see less hiring in the coming months as their access to credit becomes more constrained.
Economists are predicting that payrolls may turn negative in the second half of the year, leading to a potential recession. While Fed Chair Jerome Powell has pushed against this assumption, some experts argue that the combination of tighter lending standards, business sentiment at recessionary levels, and lacklustre consumer confidence means that a recession is a high probability event.
In such a scenario, inflationary pressures are likely to subside quickly, opening the door to interest rate cuts later this year. But for now, the Fed’s pause on rate hikes is losing its lustre and signalling trouble for the labour market.