May 5 (Reuters) – A key data stream ahead of the Federal Reserve’s (Fed) June meeting and a possible moratorium on rate hikes kicked off Friday with stronger-than-expected jobs data , indicating that U.S. employment and wage growth remain resilient.
The data showing that the economy added 253,000 jobs in April and hourly wages rose at an annual rate of 4.4% is just the first in a series of reports. It includes an update on prices starting next week, which the Fed expects him to receive by June 13th. 14 meeting. The report itself did not change broad market expectations that the Fed would keep rates stable in the 5% to 5.25% range next month.
But it shows that the economy continues to surprise.
Employment growth is trending downward, with an average three-month salary increase of over 500,000 at the beginning of 2022 now reaching 222,000.
“It will encourage monetary policymakers to continue moving the labor market into a better balance,” said Nick Bunker, head of economic research at Indeed Hearing Lab.
But April’s jobs report shows how “persistent” many of the economic variables the Fed is watching. Wage growth is flat. For example, levels that the central bank ultimately feels are inconsistent with falling inflation.
Fed Chairman Jerome Powell said this week that he doesn’t think current wage increases are necessarily driving inflation, and that the two “tend to move together” in ways that are difficult to untangle. bottom. But according to this week’s Productivity Report, output per worker has fallen in his first three months of the year, with unit labor costs soaring.
“The labor market is surprisingly hot and tight,” said Nationwide chief economist Kathy Bostjancic. The likelihood of feeling the need to raise rates starts to grow.”
April’s figures “should lower market expectations that rate cuts will begin in the third quarter,” she said, as the jobs report again fell below evidence of a looming recession.
Futures traders that track the Fed’s policy rate have refrained from betting on a rate cut that begins shortly after its July meeting, but feel the Fed will be encouraged to move from fighting inflation to protecting growth. This year’s.
April’s jobs report also added weight to new economic forecasts due at the Federal Reserve’s June meeting.
Central banks don’t want the job market to collapse.
However, the Fed’s March forecast for the unemployment rate to reach 4.5% by the end of the year was left behind as labor market conditions deteriorated sharply after the unemployment rate fell from 3.5% to 3.4% in April. Less time means less.
Changes in the unemployment rate can be driven by different aspects of the labor market, in this case partly due to a decline in the number of job seekers, with the labor force shrinking slightly. The number of unemployed (those who have lost their jobs but are actively looking for work) has decreased.
The Fed is also expected to receive May’s unemployment report by its next meeting, and a revision to last month’s unemployment rate, like this one, could make the situation appear more easing than initially thought. there is.
Still, all things being equal, policymakers’ forecasts updated in June should take into account a tighter-than-expected job market and extrapolate how that might change the course of inflation. I have.
It may not be possible to change policymakers’ perception of rates that are “restrictive enough” to keep inflation from current levels, which are more than double the Fed’s 2% target. Between the stress in the banking industry and the possibility of a federal debt limit crisis, there are reasons to be wary of further rate hikes.
But the availability of time in lieu of further rate hikes could add to their commitment to sustain rate hikes even longer.
“My view is that inflation will not come down so quickly,” Powell said at a press conference on Wednesday. It wouldn’t be appropriate and we wouldn’t cut rates.”
Reported by Ann Saphir Edited by Mark Heinrich
Our criteria: Thomson Reuters Trust Principles.