Follow Us on Google News
The Federal Reserve officials are banking on the slower growth of U.S. jobs to fight high inflation. They are expected to receive key employment and wage data on Friday, which will be the last before their interest rate decision in early May.
Economists anticipate a middling result for March, which was a month plagued by the largest bank failures since the 2007-2009 financial crisis. For a brief time, policymakers’ attention shifted from inflation to financial stability.
However, for now, it seems that the worst-case scenarios for the financial sector have been avoided, and the focus is back on the real economy, including employment and wage growth, which is expected to remain above what is consistent with the Fed’s 2% inflation target.
The expected tepid growth in manufacturing jobs and fewer industries adding jobs may indicate a sense among businesses that the economy is slowing and consumer demand is weakening. These developments could help ease the pace of price increases.
However, the headline numbers may not give much comfort to the U.S. central bank. Economists expect a gain of 239,000 jobs in March, with hourly wages rising at a 4.3% annual rate, and the unemployment rate remaining at 3.6%. This is a level seen less than 20% of the time since World War Two.
The Labor Department is scheduled to release the report at 8:30 a.m. EDT (1230 GMT). By comparison, payroll growth in the decade before the COVID-19 pandemic averaged about 180,000 per month, and wage growth remained close to the 2%-3% range seen by Fed policymakers as consistent with their goal of a 2% annual increase in the Personal Consumption Expenditures price index.
The PCE price index was rising 5% annually as of February or 4.6% when excluding volatile food and energy prices. This is too high for the Fed’s liking, and improvement has been coming slowly in recent months.
These factors indicate that the FED is likely to raise its benchmark overnight interest rate by another quarter of a percentage point at its May 2-3 meeting, keeping them on track to meet their goal.