In the month of March
In the month of March
US employers are gradually slowing their hiring and wage gains have moderated from a rapid pace, a good sign that the Federal Reserve is trying to create an economic cooling that will allow price inflation to return to a more normal pace.
The March employment report presented a picture of a slowly declining labor market. But it comes at a critical juncture for the central bank, as a series of high-profile bank busts last month could change the economic landscape in the coming months.
Policymakers are watching carefully how banks, investors and other lenders react to the turmoil. If they pull back sharply and access to credit becomes more difficult and expensive, that could dampen consumer spending and business expansion. The central bank has been raising interest rates since last March to cool the overheated economy, but the bank’s decline could make some of the central bank’s work for it. If the reaction is severe enough, it can even increase the chances of a bad recession.
Fed officials are expected to raise rates at their March 22 meeting and may raise one more time this year. But Federal Reserve Chairman Jerome H. Underlined The central bank may do more or less depending on the severity of the downturn. Authorities are waiting to see what happens.
“This rearview mirror snapshot points to a soft landing for the U.S. economy, with the landing zone getting shorter and shorter,” Gregory Dago, chief economist at consulting firm EY-Parthenon, wrote in a note after the jobs report was released. . He said he thought the report would put the central bank “on track” for one more quarter-point rate hike before pausing to adjust policy.
The central bank will announce it Next rate decision On May 3.
While the central bank should watch lending conditions in addition to economic data, Friday’s numbers may give officials a little more confidence that the labor market is moving in the direction they expected.
Average hours Revenue growth That retreated to 4.2 percent in the year to March, down from 4.6 percent in the previous month and the slowest pace since June 2021. While this is unusually fast growth, the pace of wage gains is slowing — good news for central bank policymakers.
While central bankers have generally welcomed firmer wage increases, many worried that wages were rising so quickly that it would be difficult to fully reduce inflation. When employers pay more, they try to charge more to cover rising labor costs. And when households earn more, they can absorb price increases without recouping spending.
“Wage growth is cooling, job gains are cooling — that’s what the Fed expects,” said Julia Coronado, founder of Macro Policy Perspectives. “We have a better balance of demand and supply.”
While employers are still hiring at a faster clip compared to prepandemic norms, that’s happening as workers re-enter the labor market. It increases the labor supply, which will help to alleviate the labor shortage.
Ms. Coronado indicated that the labor market was still cooling — construction hiring had begun to retreat — and said she thought the Fed could hold off on raising rates in May if officials wanted to.
The central bank “probably will, but based on this report they don’t have to,” he said.