Achi news desk-
Sign now hiring outside of business in Somerville, Mass., as of September 1, 2022.BRIAN SNYDER/Reuters
US jobs growth blew past expectations in March and wages rose steadily, suggesting the economy ended the first quarter on solid ground and possibly delaying interest rate cuts the Federal Reserve expected this year.
The closely watched employment report from the Labor Department on Friday also showed that the unemployment rate fell to 3.8 percent last month from 3.9 percent in February. The drop in the jobless rate reflected a sharp rebound in household employment, which more than absorbed the 469,000 people who entered the workforce.
The unemployment rate has remained below 4 percent for 26 straight months, the longest such period since the late 1960s. The US economy is outperforming its global peers even though the Fed has raised rates by 525 basis points since March 2022 to ease inflation. The labor market is benefiting from an increase in immigration over the past year.
Although the strong hiring did not change expectations that the US central bank would start easing rates this year given the growing labor supply, financial markets are skeptical of the three cuts predicted by policymakers.
“Although the favorable supply-side developments are consistent with (Fed Chairman Jerome) Powell’s benign view of the outlook, the apparent absence of any cracks developing on the demand side should reduce the urgency to ease policy, and we are pushing our call back for the first Fed cut from June to July,” said Michael Feroli, chief US economist at JPMorgan in New York.
Nonfarm payrolls increased by 303,000 jobs last month, the Labor Department’s Bureau of Labor Statistics said. The economy added 22,000 more jobs than previously estimated in January and February. Economists polled by Reuters had forecast 200,000 new jobs in March, with estimates ranging from 150,000 to 250,000.
Job gains in the first quarter averaged 276,000 per month compared to the October-December quarter average of 212,000.
Economists say most businesses have locked in lower borrowing costs ahead of the US central bank’s tightening cycle, providing some insulation from higher borrowing costs and allowing them to retain their workers.
Interest rate-sensitive industries, such as construction, are also boosting hiring as financial conditions ease.
About 59.4 percent of industries added jobs last month, further easing concerns that employment is concentrated in too few sectors. The healthcare sector led the broad increase in employment, adding 72,000 jobs spread across ambulatory services, hospitals as well as nursing and residential care facilities.
Government payrolls increased by 71,000 jobs, boosted by local and federal government hiring.
The construction sector added 39,000 jobs, about double the average monthly increase of 19,000 over the past 12 months.
Leisure and hospitality payrolls rose by 49,000, returning employment to its pre-pandemic level. There has also been an increase in employment in the social support, retail and wholesale trade sectors.
Financial activities reported moderate gains in payroll as did mining and logging, transportation and warehousing.
Professional services and business employment rose slightly, with temporary help – seen as a source of future employment – showing a slight decline. But manufacturing added no jobs last month as did the information sector. Utilities are losing 400 jobs.
Average hourly earnings rose 0.3 percent in March after gaining 0.2 percent in the previous month as some weather distortions faded. Wages rose 4.1 per cent year-on-year, the smallest increase since June 2021, after rising 4.3 per cent in February.
Wage growth is considered to be in the 3 per cent-3.5 per cent range consistent with the Fed’s 2 per cent inflation target.
Next week’s inflation data will be crucial in determining the timing of the first rate cut. The Fed has kept its policy rate at the current range of 5.25 percent-5.50 percent since last July. Following the report, financial markets saw two rate cuts this year, according to LSEG data.
“While we… believe the Fed is likely to go ahead with three rate cuts this year, reports like these may tip some policymakers towards expecting fewer rate cuts in 2024,” said Lydia Boussour, senior economist at EY-Parthenon in New York.
Dallas Federal Reserve President Lorie Logan said Friday that an inflation landscape facing head-on risks argues against any imminent push toward easier monetary policy.
“I think it’s way too soon to think about cutting interest rates,” Logan said in remarks prepared for a speech at Duke University.
Before lowering rates, “I will need to see more of the uncertainty resolved about what economic path we are on. And, as always, the (Federal Open Market Committee) should remain prepared to respond appropriately if inflation continues to decline,” he said.
Stocks on Wall Street were trading higher. The dollar rose against a basket of currencies. US Treasury prices fell.
The average working week rebounded to 34.4 hours last month, from 34.3 hours in February. That, combined with strong wages, boosted aggregate hours worked by 0.5 percent, consistent with expectations for solid economic growth in the first quarter.
Gross domestic product growth forecasts for the January-March quarter are as high as an annual rate of 2.5 percent. The economy grew at a pace of 3.4 per cent in the fourth quarter.
The strong job gains seen in last month’s establishment survey were reflected in the smaller and more volatile household survey, from which the jobless rate is derived. Household employment rebounded by 498,000 jobs after falling for three straight months.
Both surveys had diverged significantly in recent months. Economists attributed the difference to an increase in labor supply due to immigration which was not yet captured in the household survey.
The Congressional Budget Office recently upgraded its immigration estimate for 2023 to 3.3 million from 1.0 million.
The BLS uses US Census population estimates and will likely update the population flows in its annual benchmark review next year.
Researchers at the Brookings Institution in Washington estimated that the new CBO projections suggest that the labor market in 2023 could accommodate employment growth of 160,000 to 230,000 per month, compared to previous projections of 60,000 to 130,000, without adding pressure to wages and price inflation.
The labor force participation rate, or the share of working-age Americans who have a job or are looking for a job, rose to a four-month high of 62.7 percent from 62.5 percent in February.
The employment-to-population ratio, which is seen as a measure of an economy’s ability to create employment, also climbed to a four-month high of 60.3 percent from 60.1 percent in February.
“Clearly, the job market has plenty of gas in the tank in terms of demand, and it also has room to run in terms of worker supply,” said Nick Bunker, director of North American economic research at Indeed Hiring Lab in Tampa, Florida. “That’s a good thing for all of us.”
Ad blocking test (Why?)
Source link
Related
