8 March 2024
If you are covering the latest US jobs data, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“Despite the still challenging conditions, the US economy has once again beaten expectations with nonfarm payroll employment increasing by 275,000 in February - far exceeding the forecast of 200,000. However, the unemployment level saw an unexpected uptick to 3.9%.
“The Federal Reserve will be relieved to see the first signs of softening as it gears up to begin rate cuts later this year. However, while the unemployment rate has risen, it remains low by historical standards. Similarly, though the level of employment growth is markedly lower than the 353,000 and 333,000 gains seen in the prior two months, it remains considerably higher than had been predicted, and this level of growth is likely still too strong for the Fed to commit to the June rate cut that markets have been pricing in.
“In its January interest rate decision, the Fed doubled down on its commitment to a ‘data dependent’ strategy and the fresh jobs figures will undoubtedly weigh heavily in this calculus. All eyes will now pivot to the impending inflation report, anticipated to reveal a 0.4% climb in February, nudging ahead of January’s 0.3% increase. The Fed, having steered the economy with a steady hand thus far, is poised to maintain its cautious stance, likely resisting the clamour for rate reductions in the immediate term.
“Just yesterday the European Central Bank opted to hold rates once more, signalling a broader trend of prudence among central banks, with the Federal Reserve and the Bank of England expected to shortly follow suit. Central banks are navigating a delicate balance, wary of unsettling the hard-fought gains against inflation, but soon one of them will need to make the first move and kick start the shift in policy.”
