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Written by: Sophie Lund-Yates | Hargreaves Lansdown
- The US economy added 303,000 jobs in March, compared to the 200,000 expected and 275,000 in February
- January data also revised up, meaning employment in January and February combined is 22,000 higher than thought
- Overall, data points to labour market remaining overly-heated
The US economy has piled on over 300,000 jobs in the last month. This latest data set shows the US economy isn’t losing heat. These figures don’t show the much-needed reduction in friction between the number of candidates and vacancies, meaning wages are more likely to remain in an upwards trajectory. Not only does this make the fight against inflation more difficult, it puts a potential pin in hopes for an interest rate cut in June.
Interestingly, the increase in jobs was partly because of an increase in leisure and hospitality, which has now returned to pre-pandemic levels. This is another indication that the economy has plenty of excess energy that may need to be tamed by continued higher rates.
It's been a week of mixed messages from the Federal Reserve, where cuts are very much still on the table for the year, but policymakers won’t be drawn into giving any guarantees. Some corners of the market think cuts could be delayed until 2025, and it’s certainly true that a run of weaker economic data will be needed for these to happen. Investor attention will be squarely focused on big-tech earnings and commentary in the coming weeks, as these industry titans have been a leading cause of wage inflation.
Ultimately, today’s labour data is a step in the wrong direction, and the Federal Reserve’s dashboard still has some warning lights to deal with before signalling the all-clear for cutting.
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