In the United States, job growth experienced a slight moderation in March, accompanied by continued increases in wages, signaling a robust end to the first quarter for the economy and potentially postponing anticipated interest rate cuts from the Federal Reserve later this year.
According to a report released by the Labor Department last Friday, the unemployment rate is expected to remain below 4% for the 26th consecutive month, marking the longest such streak since the late 1960s. Despite the Federal Reserve implementing 525 basis points worth of rate hikes since March 2022 to curb inflation, the U.S. economy continues to outperform its global counterparts.
Economists note that many businesses secured lower borrowing costs before the Federal Reserve’s tightening cycle, providing them with some insulation against higher rates and enabling them to retain their workforce. Moreover, healthy household balance sheets are bolstering consumer spending, while increased immigration over the past year has further boosted the labor market.
Analysts anticipate that nonfarm payrolls likely increased by 200,000 jobs in March, following a rise of 275,000 in February. Job growth estimates for March ranged from 150,000 to 250,000.
Improving financial conditions are driving hiring in interest rate-sensitive industries such as construction, which witnessed a surge in payrolls in February. However, employment in sectors like healthcare, leisure and hospitality, and state and local government still lags behind pre-pandemic levels.
The National Federation of Independent Business’ measure of small businesses intending to add jobs over the next three months declined in March to its lowest level since May 2020. This is often viewed as a reliable predictor of payroll gains.
Dean Maki, chief economist at Point72 Asset Management in Stamford, Connecticut, highlighted, “The easing of financial conditions is now leading to better job growth in many sectors, especially interest-sensitive ones like construction.”
Although financial markets anticipate the Federal Reserve to initiate rate cuts in June, Fed Chair Jerome Powell reiterated the central bank’s cautious approach, stating that there is no rush to adjust policy rates after leaving them unchanged in the current range of 5.25%-5.50% last month.
Average hourly earnings are projected to have increased by 0.3% in March, following a 0.1% gain in February, as weather-related distortions dissipate. However, the annual wage growth rate is expected to have slowed to 4.1% in March from 4.3% in February. Wage growth within the range of 3.0% to 3.5% is considered consistent with the Federal Reserve’s 2% inflation target, although inflation levels remain elevated by most measures.
