US employment data came out and showed growth levels that indicate the Federal Reserve could keep rates high for some time yet.
He US employment report, which was published this Friday, revealed that the level of hiring increased in April and also reported an increase in worker wages. These data give indications of a sustained strength of the labor market in that country and that could make the Federal Reserve (Fed)which has raised its policy rate by 500 basis points since March 2022, will keep it higher for some time.
Unemployment fell to 3.4% from 3.5% in March and the report indicates that non-farm payrolls increased by 253,000 positions job last month, the Labor Department’s employment report showed. March data was revised downward to show that 165,000 jobs were added instead of the 236,000 previously reported.
payrolls are very above the monthly increase of 70,000-100,000 needed to keep up with the growth of the working-age population. Average hourly earnings rose 0.5% after advancing 0.3% in March and wages increased 4.4% year-on-year in April after climbing 4.3% in March.
The labor market overreacts
Other measures, such as the employment cost index and the Atlanta Fed wage tracker, are also showing momentum. Analysts believe that the wage growth remains too strong to be consistent with the 2% inflation target of the fedwhich raised its benchmark overnight interest rate by another 25 basis points to the 5.00%-5.25% range on Wednesday, signaling it could pause the central bank’s faster tightening campaign of the United States since the 1980s, although it maintained an aggressive bias.
Also, many economists believe that the labor market is exaggerating the health of the economypointing to the divergence between consumer spending and job creation, as well as a continued decline in worker productivity.
Consumer spending stagnated in February and March. Productivity has declined year on year for five consecutive quarters, the longest period since the government began tracking the series in 1948.
The economists also pointed out that the job growth it was concentrating more on the leisure and hospitality industry, as well as state and local governments, sectors where employment remains below pre-pandemic levels.
With the increase of risks of a recession Due to borrowing costs and tighter credit conditions amid financial market stress, the hiring landscape could change quickly.
For now, the general consensus is that the economy will continue to create jobs at least until the fourth quarter.
Source: Ambito
