US employers added 253,000 jobs in April, way above economists' expectations, while the jobless rate moved a notch lower to 3.4% from a previous 3.5%, according to Labor Department data on Friday that appeared to make it harder for the Federal Reserve to stop raising interest rates
WASHINGTON (Pakistan Point News / Sputnik - 05th May, 2023) US employers added 253,000 jobs in April, way above economists' expectations, while the jobless rate moved a notch lower to 3.4% from a previous 3.5%, according to Labor Department data on Friday that appeared to make it harder for the Federal Reserve to stop raising interest rates.
Economists polled by US media had expected a jobs growth of just around 180,000 for April, from a previously published 263,000 for March which the Labor Department now revised down to just 165,000. Fed officials have said employment and wage growth have to cool significantly to effectively restrain the worst inflation the United States has experienced in four decades.
The labor market has been the juggernaut of US economic recovery from the pandemic, with hundreds of thousands of jobs being added without fail since June 2020 to make up for the initial loss of 20 million jobs to the pandemic. Average monthly wages have also grown without a stop since May 2021. The Fed has identified robust job and wages growth as two of the key drivers of inflation.
Inflation, as measured by the Consumer Price Index (CPI) hit 40-year highs in June 2022, expanding at an annual rate of 9.1%. Since then, it has slowed, growing at just 5% per annum in March, for its slowest expansion since October 2021. The Fed's favorite price indicator, the Personal Consumption Expenditures (PCE) Index, meanwhile, grew by just 4.2% in March.
Even so, those numbers were more than twice the Fed's appetite for inflation, which stands at just 2% per annum. The central bank has raised rates by 10 times since the end of the coronavirus pandemic in March 2022, adding a total of 5% to the previous 0.25%. Until Friday's overwhelmingly strong jobs data for April, there had been speculation that the Fed could pause rate hikes from June onwards.
Instead, traders of short-term US interest-rate futures priced in a small chance of a Fed hike in June. They pared Fed rate-cut expectations by the year-end.
"This (jobs number) is undoubtedly hawkish and puts the Fed in a real bind," economist Adam Button said in a post on the ForexLive forum. "The Fed wants to pause and may soon even need to cut but the jobs market isn't cooperating. Now, jobs are certainly a lagging indicator but 3.4% unemployment is extraordinarily tight and this is the 13th straight month of non-farm payrolls beating the consensus estimate."
The Fed has a mandate of ensuring "maximum employment" through a jobless rate of 4% or below, and keeping inflation "manageable". The last was a task easily achieved before the COVID-19 breakout, when prices expanded less than 2% a year. The pandemic and the trillions of dollars of relief spending by the government, however, triggered runaway inflation since mid-2021.
After its last rate hike, the Fed said it will "closely monitor" data in the coming months and assess their effectiveness in helping the United States return to its inflation target of 2%.
Despite the robust jobs number for April, it would not be surprising if the Fed stalls on rate hikes from June as data increasingly pointed to weakness in the US economy, some analysts said.
Over the past week alone, gross domestic product data for the first quarter showed an anemic 1.1% growth on the year versus the 2.6% in the fourth quarter of 2022.
A US banking crisis that broke in March resurfaced in part this week with the takeover of San Francisco-based First Republic Bank. Adding to that were concerns about a potential US debt default, the first ever, and more weak readings on factory orders and durable goods.
