Sunday, May 26, 2024

What You Need Know Ahead of Friday’s Closely Watched Monthly US Jobs Report

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Key Takeaways

  • Forecasters expect an official government report on Friday to show the labor market added 200,000 jobs in March.
  • That would be above the pre-pandemic average monthly job growth, and mark the 39th month in a row the economy has added jobs.
  • The labor market is still going strong despite the Federal Reserve’s campaign of anti-inflation interest rate hikes.
  • Job growth far above or below expectations could influence the Fed’s decision on when to cut interest rates.

The labor market’s winning streak likely continued in March, with employers steadily adding jobs to an already healthy economy, if forecasts are correct.

When the Bureau of Labor Statistics releases its widely watched report on employment Friday, it’s expected to show the economy gained 200,000 jobs, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal. That would be down from 275,000 in February, but solid by historical standards—the average in the five years leading up to the pandemic was 191,000.

The economy has gained jobs every month since December 2020, with March likely marking the 39th straight month of job gains.

Forecasters also expect the unemployment rate to decline to 3.8% from 3.9%, not far from the 50-year low of 3.4% it reached last April, as layoffs remain relatively rare. 

Should those projections hold, it would be further evidence of the economy’s resilience under the weight of the Federal Reserve’s high interest rates, which have kept borrowing costs on all kinds of loans at their highest in decades to restrain inflation. 

“Instead of downshifting, the U.S. labor market seems to be gearing up again,” Sal Guatieri, senior economist at BMO Capital Markets, wrote in a commentary.

Financial markets could move based on how the jobs data affects the outlook for the Fed to cut interest rates later this year. The Fed has been holding its benchmark interest rate at its highest since 2001, and officials have said they’re watching economic data to determine when they will cut rates.

As of Monday afternoon, financial markets were pricing in a 58% chance that the central bank would begin to cut rates at its meeting in June according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data. 

A surprisingly hot labor market could derail those expectations—Fed officials have worried that rapid wage growth could keep inflation above the Fed’s target of a 2% annual rate. On the other hand, an unexpectedly weak hiring market could push the Fed to cut rates faster and sooner to help stimulate business and stave off a recession. 

A jobs report that comes in close to expectations probably wouldn’t move the needle much either way, economists at BMO Capital Markets said. However, in light of recent comments from Fed officials showing a murkier path forward, that may be a good thing.

“Like last month, our forecast—if accurate—should reduce fears of reacceleration and the risk that the Fed cannot ease policy this year. It should re-anchor expectations for a cooling labor market, but not one that is showing significant signs of weakness,” wrote economists at Bank of America this week.

Update, April 4, 2024: This article was updated to include recent comments by Federal Reserve officials and additional economist commentary.

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