William Simpson
U.S. hiring slowed in April, a sign that the Federal Reserve’s efforts to restrict economic growth and contain inflation are cooling the job market.
American employers added 175,000 jobs last month, well below expectations of about 232,000 and far from the blockbuster job creation in March, when employers created an astonishing and upwardly revised 315,000 jobs.
The nation’s unemployment rate remained little changed at 3.9%, continuing a 27-month period in which it remained below 4%, the longest since the 1960s, the U.S. Department of Labor reported. he said Friday.
Smallest payroll increase in six months Thedispelled concerns that an overheated economy would prevent the Federal Reserve from cutting interest rates later this year.
Wall Street applauded the report, with stocks rising sharply and bond yields falling.
Following the data, interest rate futures showed a slightly higher probability of a cut in July, although still below 50%. The probability of a rate cut in September has risen to about 75% from 60% on Thursday, according to for CME Group.
What this means for a Fed rate cut
Some analysts have stressed that a report does not, by itself, represent a trend and that the Fed would need to get more evidence that inflation is under control before reducing borrowing costs.
“The report does not change our call for the Federal Reserve to wait until September before cutting interest rates. The labor market is still healthy and the Fed needs to see several months of benign inflation data before cutting rates.” , said Nancy Vanden Houten, leader. North American economist at Oxford Economics.
Art Hogan, chief market strategist at B. Riley Wealth, said there is more good news than bad in the report.
“Coming into today’s press, the three-month average was 260,000, now it’s 230,000,” Hogan said. “Today’s 175,000, although below expectations, is actually a fantastic number considering the average over the last three months.”
In addition to payrolls, wage and hour data was also weaker than expected.
“The upside to the current nonfarm payrolls number, which is weaker than expected, is that it probably takes some pressure off annualized wage growth,” Hogan said, noting that annualized wage growth has slowed to 4.3 %, from 5.1% at the beginning of this year. “Wages are still rising, but not at a rate that prevents the Fed from finding a reason to cut interest rates.”
“A slowdown in payrolls to a decent pace early in the second quarter, coupled with a slowdown in wage gains, will be good news for policymakers, who think the current policy stance is restrictive and will weigh on demand, economic activity and inflation over time. ,” said Rubeela Farooqi, chief US economist at High Frequency Economics, in a report.
“The current readings also support the view that rate cuts – not hikes – are the base case for the Fed this year,” Farooqi added.
Surprisingly strong economic growth and persistently high inflation have pushed back the Fed’s timeline for reducing borrowing costs for consumers and businesses.
The central bank said on Wednesday it was maintaining its reference interest rate at a two-decade high of around 5.3%, with Fed Chairman Jerome Powell acknowledging that inflation is retreating more slowly than policymakers expected. Starting in March 2022, the Fed raised its short-term rate 11 times in an attempt to contain rising inflation as the economy recovered from the pandemic.
Although many economists expected the campaign to tighten monetary policy to tip the U.S. into recession this year, robust job gains, healthy consumer spending and strong business profits have kept the economy humming.
