The US economy likely posted another sizeable payroll rise in March, with further acceleration in job growth despite an already tight labor market likely setting the stage for further rate hikes by the Federal Reserve.
The Department of Labor will release its March jobs report Friday at 8:30 a.m. ET. Here are the key metrics expected from the print, compared to consensus estimates compiled by Bloomberg:
Pay slips outside of agriculture: +490,000 expected, +678,000 in February
unemployment rate: 3.7% expected, 3.8% in February
Average hourly earnings, month by month: 0.4% expected, 0.0% in February
Average hourly earnings year-on-year: 5.5% expected, 5.1% in February
The payrolls recorded a stunning upside surprise at 687K in February, marking the fourteenth straight month of US labor force expansion. The surge in jobs created or added last month brought the number of employed Americans closer to pre-pandemic levels, though 1.14 million are still missing.
Experts expect the latest data to reflect another robust month of recruitment. Economists polled by Bloomberg expect jobs to rise by 490k, according to consensus data.
“It will be a challenge to keep up with the 678,000 jobs added in February,” said Mark Hamrick, senior economic analyst at Bankrate.
Data over the past few months has reflected the ongoing momentum of the labor market recovery, even as an Omicron surge in cases of COVID-19 dampened demand for labour, particularly in the high-contact service sector. The unemployment rate fell to 3.8% in February, the lowest level since the outbreak of the virus and the upheaval in the US economy. Notably, the improved unemployment rate was offset by an unexpected increase in labor force participation to 62.3%. Consensus economists expect the unemployment rate to fall further to 3.7% in March.
The story goes on
“If we see a fall in the unemployment rate, that would mark a new pandemic low,” Hamrick said. “How many more people came into the workforce will be part of the equation.”
Composed of help-seeker ads and job ads in Minnesota. (Photo by: Michael Siluk/Universal Images Group via Getty Images)
JoAnne Feeney, partner and portfolio manager at Advisors Capital Management, told Yahoo Finance Live that while any reading in the upper 400,000 range is considered positive, there are still too few job seekers.
“The real thing we are focusing on is labor force participation. Are we getting more workers coming back?” she said. “That’s the biggest impediment to the economy continuing to grow right now because there just aren’t enough people to fill those jobs, so I think it’s going to be the better signal of how much growth there is when they get back into the economy.” labor market return ahead of us.”
The labor shortage has been a major challenge, not only for U.S. employers, who are struggling to find enough workers to meet demand as millions of Americans remain on the fringes of the labor force, but also for the Federal Reserve, which is trying to expand its workforce primary economic goals to achieve the maximum employment and price stability.
These tightening jobs heavily influenced the central bank’s decision to tighten monetary policy, with economic strength suggesting officials that the US economy could weather less accommodating financial conditions.
“The Federal Reserve has a dual mandate to promote employment and stable prices,” Ted Rossman, Bankrate’s senior industry analyst, said in a note. “The strong labor market is prompting the Fed to focus on fighting high inflation. Fed Chair Jerome Powell has recently hinted at a more aggressive pace of rate hikes and this report fits that narrative as inflation is a much bigger problem than unemployment right now.”
Powell, in a recent testimony before the House Financial Services Committee, acknowledged that while labor demand is strong and labor force participation has increased slightly, labor supply remains subdued.
“As a result, employers are struggling to fill vacancies, an unprecedented number of workers are quitting to take new jobs, and wages are rising at the fastest pace in many years,” Powell said.
Although average hourly wage growth slowed in February, wages have risen well above pre-pandemic trends and, in turn, have contributed to much of the inflationary pressures heating up across the US economy.
Bank of America, in a recent statement, noted that amid the job market recovery there is a higher level of job openings for a given unemployment rate than there have been in the past. As a result, the near-term non-inflationary unemployment rate (NAIRU) could be higher than longer-term estimates, suggesting more sustained wage and price pressures near-term, according to the bank.
Earlier this week, the Labor Department’s JOLTs (Job Openings and Labor Turnover Summary) showed there were a total of 11.266 million job openings, down slightly from a record high but still far outpacing new hires.
“In the labor market of the pandemic, the Beveridge curve (the relationship between unemployment and the job vacancy rate) has shifted extraordinarily outward, suggesting that it is difficult to match workers with jobs,” BofA economists said in a recent published notice. “This discrepancy could be due to rising spending on goods and therefore a shortage of labor in the hottest part of the economy.”
Friday’s jobless numbers, which are expected to build on this trend, come as policymakers appear to be acknowledging the possibility that more aggressive rate hikes will be required, with several Fed officials – including Powell – making one in recent weeks Increase by 50 basis points have indicated table.
“The payroll report could be the biggest yet in this recovery from the pandemic,” FWDBONDS chief economist Christopher Rupkey said in a recent statement. “Fed officials are already pushing for bigger 50 basis point rate hikes at upcoming meetings, and the tightest job market since the 1960s is like pouring gasoline on a fire, with every political official worth their salt burning with desire to raise interest rates up 2% neutral level now.”
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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