Unemployment Rates

Strong US Job Growth Expected in March; unemployment rate drops to 3.7%

The sign of an auto oil change shop reads ‘Sos Help Wanted’ in Brockton, Massachusetts, U.S., January 4, 2022. REUTERS/Brian Snyder

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  • Non-farm payrolls expected to rise 490,000 in March
  • Unemployment rate expected to fall to 3.7% from 3.8%
  • Average hourly wage forecast rebounding 0.4%
  • Average work week stable at 34.7 hours

WASHINGTON, April 1 (Reuters) – U.S. job growth likely continued at a healthy pace in March, with the jobless rate falling to a new two-year low of 3.7% and reaccelerating wages, which would position the Federal Reserve to increase interest. rate of 50 basis points in May.

The closely watched Labor Department jobs report on Friday would underscore the strong momentum in the economy as it weathers rising inflation headwinds, monetary policy tightening as well as the Russia’s war on Ukraine, which further strains global supply chains and adds to price pressures.

Last month, the Fed raised its key rate by 25 basis points, the first hike in more than three years. Policymakers have stepped up their hawkish rhetoric, with Fed Chairman Jerome Powell saying the US central bank must act “quickly” to raise rates and perhaps “more aggressively” to prevent high inflation from taking hold . Read more

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The March jobs report and April 12 consumer price data will be crucial to the Fed’s rate decision at its May 3-4 policy meeting.

“The broad view of a tight labor market will continue to stretch into March,” said Sam Bullard, senior economist at Wells Fargo in Charlotte, North Carolina. “Obviously, that’s one of the things the Fed is looking at, in addition to inflation and the outlook for inflation, as it prepares to potentially pick up the pace of policy tightening in the future. to come up.”

The establishment survey is expected to show nonfarm payrolls rose by 490,000 jobs last month after jumping by 678,000 in February, according to a Reuters poll of economists. Estimates ranged from 200,000 to 700,000.

Although March’s expected job growth is slower than February’s robust pace, it would still be within the range of 424,000 to 678,000 set over the past six months.

A smaller number in March could also be offset by expected upward revisions to the February tally. Payroll data have undergone significant upward revisions in recent months.

Hiring demand is being driven by a sharp drop in COVID-19 infections, which has led to the lifting of restrictions across the country. There is no indication yet that the Russian-Ukrainian war, which pushed gasoline prices above $4 a gallon, has had an impact on the labor market.

The job gains last month were likely broad-based.

“Any shortfall in employee numbers will by no means be a story of a collapse in labor demand,” said Simona Mocuta, chief economist at State Street Global Advisors in Boston.

There were a near-record 11.3 million job vacancies on the last day of February, government data showed on Tuesday, leaving the gap between jobs and workers at 3.0% of the labor force and near the post-war high of 3.2% in December. The labor pool appears to have continued to increase gradually in March.

WORKERS RETURN

According to a report by global outplacement firm Challenger, Gray & Christmas on Thursday, the skyrocketing cost of living was “pushing workers who depended on savings or investments to seek gainful employment.”

Annual inflation rose in February to the highest level in 40 years. Inflation is also being boosted by companies raising wages as they jostle for scarce workers.

The average hourly wage should rebound by 0.4% after being stable in February. This would bring the annual increase to 5.5% from 5.1% in February. Monthly wage gains could be lower than expected. Employment report data is collected during the week that includes the 12th day of the month.

“Because the 15th of the month fell outside the reference week, fortnightly wage increases during the period were less likely to be captured in the survey, increasing the chances of another result below the reference week. trend,” said Kevin Cummins, chief U.S. economist. at NatWest Markets in Stamford, Connecticut.

The average workweek likely held steady at 34.7 hours.

The details of the household survey, from which the unemployment rate is derived, should reflect the strength of the establishment survey. The unemployment rate is expected to fall to 3.7%, the lowest since February 2020, from 3.8% in February.

The drop is expected even as the labor force participation rate, or the proportion of working-age Americans who have or are looking for a job, is expected to rise 62.3% in February, which was the most high since March 2020.

The jobs report would further dispel fears in financial markets of a recession following a brief inversion in the widely watched 2-year/10-year US Treasury yield curve this week.

Economists said the Fed’s massive holdings of Treasuries and mortgage-backed securities made it difficult to get a clear signal of yield curve movements. They also noted that real yields remained negative. Others argued that the two-year/five-year Treasury yield curve was a better indicator of a future recession. This segment has not been reversed.

“Reversal or not, it doesn’t imply an impending recession,” said Padhraic Garvey, regional head of research at ING in New York. “An inverted curve only tells us that a recession is coming in two to four years. A lot can happen in that time.”

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Reporting by Lucia Mutikani; Editing by Andrea Ricci

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