U.S. economists are focusing on March rate hikes, despite weak employment growth


The Federal Reserve is on track Raise interest rates as early as MarchEconomists say that soaring wages and a sharp drop in unemployment dominate the US job market.

Figure Released on friday The number of new jobs in December fell sharply. Only 199,000 positions were created, less than half what analysts expected, well below the 2021 monthly average of 537,000.

However, some economists bet on rising interest rates and instead focused on rising wages and lower unemployment, dropping to 3.9% in December. This is close to 3.5% before the pandemic. The average hourly wage increased by 0.6% from the previous month. This is equivalent to an annual profit of 4.7%.

Friday’s JP Morgan Chase economist First rate rise in March In contrast to previous forecasts for the June lift-off.

Stephen Juneau, US economist at Bank of America, said: [the headline] Salary numbers are a little weaker. There’s a reason to be a little more optimistic if you dig into the details. “

He added: “All data show a very tight labor market, which all supports the idea that the Fed will move forward with a March rate hike.”

Barclays economists added that Friday’s data strengthened confidence that the Fed would raise interest rates in March and could even be suddenly announced by the central bank. End of bond purchase program At this month’s meeting.

Andrew Patterson, Vanguard’s chief international economist, said his team is discussing whether to advance the forecast for the first rate hike by March. “Rising wages and inflation weigh heavily on their hearts,” he said of the Fed’s policy makers.

Expectations for a swift tightening of monetary policy are Fed focus shiftMoved to Suppress inflation This is in contrast to returning the labor market to pre-pandemic health.

Policy makers once wanted to postpone rate hikes until the labor force participation rate, which tracks the percentage of Americans employed or looking for a job, returned to the 63% level registered at the start of the pandemic. I was there. Currently at 61.9%, fewer people are still engaged in 3.6 million jobs compared to when the virus began to spread.

Just a year ago, Federal Reserve Chair Jay Powell warned that unemployment underestimated the weakness of the labor market and instead urged investors to focus on labor force participation. ..

The US interest rate line chart (%) implied by trading Sofr futures shows that traders will step up their bet that the Fed will tighten its policies in the coming years.

“The unemployment rate announced during Covid has dramatically underestimated the deterioration of the labor market,” Powell said in a speech last February.

But he then acknowledged that the risk of sustained high inflation requires the Fed to step up its policies more quickly, even if as many people as the central bank wants do not get back to work. I changed the tone of.

“In reality, we haven’t seen a recovery in strong labor force participation yet, and it may not recover for some time,” Powell said following a policy meeting in December. “At the same time, we now have to make policies, and inflation is well above our target.”

Economists are not only inflating at the fastest pace in about 40 years now. Other indicators It shows one of the hottest job markets in history, like unemployment and wage growth.

Two senior central bank officials, Christopher Waller and James Bullard, have already supported the March move.

“The Fed doesn’t have a 0% business [rates] And purchase. .. .. Julian Timmer, Head of Global Macro Strategy at Fidelity Investments, said: “It was a strategy two years ago, and perhaps a year ago. So far it’s certainly not appropriate and the Fed will agree with it first.”

Stephen Blitz, Chief US Economist at TS Lombard, said: We certainly have enough employment, so there is no reason why current levels of monetary easing are still in place. “

U.S. economists are focusing on March rate hikes, despite weak employment growth

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