Washington: US job growth likely slowed to a still solid pace in February, with the unemployment rate expected to remain at a more than five-decade low, prompting the Federal Reserve to keep interest rates longer and higher. Can see to overcome. inflation.
Wage growth is also expected to maintain its upward trend on Friday, underlining a continued tight jobs market in the closely watched employment report from the Labor Department.
The anticipated slowdown in job gains follows January’s torrid pace, which prompted financial markets to expect that the Fed will maintain its monetary policy tightening campaign through the summer.
Fed Chairman Jerome Powell told lawmakers this week that the US central bank will need to hike rates more than expected, leaving the door open for a 50 basis point hike this month.
Sung Won Sohn, professor of finance and economics at Loyola Marymount University in Los Angeles, said, “There’s no doubt the labor market is still tight, maybe hot, but I think it’s starting to cool off and the cold is coming.” The trend should continue.” ,
Non-farm payrolls are expected to have increased by 205,000 jobs last month, less than half of the 517,000 added in January, according to a Reuters poll of economists.
While it would be the smallest gain since December 2020, it would be double the 100,000 jobs per month that economists say are needed to sustain growth in the working-age population.
Economists also argue that job growth in January was impacted by a number of factors, including unseasonably warm weather, the annual benchmark revision of data as well as overly generous seasonal adjustment factors, removing seasonal fluctuations from government data. The model it uses to do this. Strong consumer spending growth in January was also partially attributable to seasonal factors.
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Estimates for February payrolls growth ranged from a low of 78,000 to a high of 325,000. Average hourly earnings are forecast to rise 0.3%, matching January’s gains.
This would put the year-on-year growth in salaries at 4.4% to 4.7%, as last year’s low readings were left out of the calculation.
“January payrolls benefited from a very mild seasonal headwind, minus 3 million jobs,” said Ellen Zentner, chief US economist at Morgan Stanley in New York, while February needs to add at least 770,000 jobs to record a positive payrolls number. Needed.” “Lower seasonal fluctuations in hiring should be a drag on the February jobs number, with labor market indicators pointing to labor hoarding.”
To get a better picture of the labor market, economists recommend looking at three- and six-month averages of payrolls. Should February payrolls meet expectations, the three- and six-month average for job gains will be above 300,000.
“This would indicate that the anticipated normalization in the labor market is taking longer than expected,” said Jan Groen, chief US macro strategist at TD Securities in New York.
tight labor market
The claim is supported by a range of labor market measures, including first-time applications for unemployment benefits, which have been very low despite high-profile layoffs in the technology industry.
Data this week showed there were 1.9 job openings for every unemployed person in January, while the Fed’s “Beige Book” report described the labor market as remaining “solid” in February, and that “layoffs Scattered reports” and “finding workers”. Desired skill or experience remained challenging.
Households’ sentiment about the labor market was also upbeat last month. Financial markets have priced in a 50-basis-point rate hike at the Fed’s March 21-22 policy meeting, according to CME Group’s FedWatch tool.
The Fed has increased its policy rate by 450 basis points since last March from the near-zero level to the current 4.50%-4.75% range.
The unemployment rate is forecast to remain unchanged at 3.4%, the lowest since May 1969.
However, some economists caution against placing too much emphasis on the narrow unemployment rate gauge, and instead favor a broader measure of unemployment, which includes people who want to work but have given up searching and They are working part time because they cannot find a job. Full-time employment.
This so-called U-6 unemployment measure stood at 6.6% in January, meaning 10.9 million people were available to work, up from 10.8 million job openings at the end of January, indicating the labor market was balanced.
“The problem is the mismatch. There are locational and skill mismatches, which basically means the labor market is not working efficiently,” said Brian Bethune, an economics professor at Boston College. “We need to remove that inefficiency and that The main challenge is. The Fed has to be careful how they interpret what’s happening in the labor market.
With people unable to move there fast enough due to barriers such as relocation costs, Bethune warned that raising rates too steeply would increase unit labor costs because companies were not going to make wholesale job cuts as in previous recessions. Happened in. ,
“We’re still in a very unusual labor market,” Bethune said. “I really don’t see how they (the Fed) can accomplish an inflation objective by inducing a major recession in the economy.”