According to data released by the US Department of Labor yesterday, non-farm payrolls in the US increased by 303 thousand in March, exceeding expectations.
During the same period, the unemployment rate decreased by 0.1 percentage points compared to the previous month, falling to 3.8 percent. The unemployment rate had reached its highest level since January 2022, at 3.9 percent in February.
Analysts noted that the tightness in the labor market strengthened the Fed’s view that “there is no need to rush to lower interest rates.”
There was a slowdown in wage growth on an annual basis Average hourly earnings, closely watched by the Fed, increased by 0.3 percent in March, reaching $34.69. Average hourly earnings, which followed a path parallel to market expectations during this period, had increased by 0.2 percent in February.
Average hourly earnings recorded a 4.1 percent increase on an annual basis. The annual increase in average hourly earnings, which came within market expectations and recorded the lowest level since June 2021, was 4.3 percent in February.
The slowdown in wage growth on an annual basis stood out as a positive aspect in the employment report.
Mixed signals were received from data on the labor market Mixed signals were received from other data on the labor market announced throughout the week in the US.
While the JOLTS job openings in the country increased to 8 million 756 thousand in February, private sector employment announced by the ADP Research Institute increased by 184 thousand in March, exceeding market expectations.
The number of initial claims for unemployment benefits, on the other hand, increased to 221 thousand in the week ending March 30, reaching the highest level in two months.
Data from Challenger, Gray & Christmas, a consultancy firm that keeps track of announced or confirmed layoffs, showed that US-based employers laid off 90,309 workers in March, reaching the highest level since January 2023.
Fed officials’ verbal guidance indicated that there is no rush to cut interest rates In addition to the data, the verbal guidance of Fed officials throughout the week also remained in the focus of investors.
Fed Chairman Jerome Powell said in a speech on Wednesday that given the strength of the economy and progress in inflation, there is time for the data to guide policy decisions.
Minneapolis Fed President Neel Kashkari warned on Thursday that interest rate cuts may not occur this year unless more progress is made in inflation.
Richmond Fed President Thomas Barkin expressed optimism that keeping interest rates somewhat restrictive could turn inflation back to target, noting that it would be “wise” for the Bank not to rush to cut interest rates.
Richmond Fed President Thomas Barkin, speaking after the employment data on Friday, said, “The labor market is very strong.”
Dallas Fed President Lorie Logan also said it is still too early to consider lowering interest rates.
Fed Board Member Michelle Bowman said it is not yet time for the Fed to consider lowering interest rates and that if progress in reducing inflation stops, more interest rate hikes could be on the table.
Predictions that interest rate cuts will begin in June have declined While uncertainty remains about when the Fed will start cutting interest rates, in the pricing in money markets amid all these developments, predictions that the Fed will begin interest rate cuts in June have dropped to 50 percent.
Analysts noted that the strong employment data supports the Fed’s cautious stance on interest rate cuts, but also pointed out elements in the report indicating a softening in inflation.
Analysts said the strong employment data supports the Fed’s cautious stance on interest rate cuts.
Analysts pointed out that inflation data to be announced next week in the US will be closely monitored, as it may provide clues about the bank’s future steps.
“All trend lines indicate that interest rate cuts should start this summer” Mark Zandi, Chief Economist at Moody’s Analytics, told AA correspondent that the strong increase in employment in March and the low and steady unemployment are another proof that the US economy remains “rock solid.”
Zandi said that despite the strong employment increase, the continuation of labor force supply at the same pace, the easing of the tight labor market, and the slowdown in wage growth are encouraging, stating:
“Wage growth is consistent with current productivity increases and the Fed’s inflation target. This should reassure the Fed that inflation will soon return to its targets and they will start cutting interest rates when this becomes clear. All trend lines indicate that interest rate cuts should start this summer, most likely at the Fed’s June meeting.”
“The possibility of a rate cut in June seems weak” James Knightley, Chief Economist at ING International, said that the Fed will not go for a rate cut in the near future due to the strong employment and the possibility that inflation will continue to remain hot, especially given the inflation data to be announced next week.
Knightley said, “Since it is likely that inflation will continue to remain hot next week, the likelihood of the Fed cutting interest rates in June seems weak.”
Knightley also noted that surveys on the outlook of the business world indicate weakness, adding that they expect to see “more evidence of cooling” until summer.
source: aa.com.tr/ prepared by Melisa Beğiç