US jobs growth is expected to have moderated in February from the previous month’s breakneck pace, but remain elevated enough to keep pressure on the Federal Reserve to reconsider bigger interest rate increases.
The world’s largest economy is forecast to have added 225,000 jobs last month, less than half of January’s whopping 517,000, but still well above what US central bank officials consider in line with easing price pressures. Those gains would lead to the unemployment rate hitting a multi-decade low of 3.4 per cent.
Wage growth, meanwhile, is forecast to have again increased 0.3 per cent from January, matching the previous monthly uptick in average hourly earnings. On a year-over-year basis, it is set to have jumped 4.7 per cent.
February’s report, due to be released by the Bureau of Labor Statistics at 8:30am Eastern Time, is one of the most consequential data releases ahead of the Fed’s next policy meeting on March 21-22.
In congressional testimonies this week Fed chair Jay Powell said the central bank would be scrutinising the report — alongside inflation and retail sales figures, among others, due next week — in order to determine whether to resume more aggressive rate rises after a deluge of unexpectedly strong data.
“They’re going to be very important in our assessment of the higher readings that we have very recently received and of the overall direction of the economy and of our progress in bringing inflation down,” he said on Wednesday, of the data, stressing that no decision had yet been made. Powell added that “the ultimate level of interest rates is likely to be higher than previously anticipated”.
In February, the Fed called time on jumbo rate rises and delivered a more traditional quarter-point increase, having repeatedly moved in half-point and three-quarter point intervals last year. At the time Powell justified the smaller rate rise by arguing that it would “better allow” officials to track progress in their goal to tame inflation and said the “disinflationary process” was under way.
But persistent labour market tightness and renewed consumer strength since then have upended expectations about the path forward for policy. Any inkling that January’s data was not a one-off will probably prompt the Fed to opt for the larger increase, economists warn.
According to the CME Group, the odds of a half-point rate rise at this month’s meeting stand at nearly 70 per cent.
