Stronger, broader hiring could ease Fed job market worries

[WASHINGTON] Hiring that strengthened and broadened in March will likely cement the US Federal Reserve's plans to keep interest rates on hold for the foreseeable future, easing concerns about a weakening labour market and keeping policymakers focused on whether rising energy prices threaten higher inflation. The March jobs report showed the economy adding workers across sectors. Manufacturing gained 15,000 jobs, the most since November 2023 when factories added 22,000 new positions, and there were gains in construction, leisure and hospitality, and transportation as well. The Black unemployment rate, considered a harbinger in the US of coming job weakness, fell to 7.1 per cent from 7.7 per cent. Along with weak job growth, Fed officials had been concerned that employment gains were so concentrated in healthcare that it meant the rest of the economy might be faltering, with policymakers such as Governor Christopher Waller closely tying their views about further rate cuts to the evolution of hiring. "It would take a big surprise to pressure them to cut now," Bill Adams, chief US economist for Fifth Third Commercial Bank, wrote following the employment data. "They are very likely on hold for at least the next decision or two." In a shortened holiday session on Friday (Apr 3), US Treasury yields rose after the data and rate futures continued to price in almost no chance the Fed would cut rates from the current range of 3.5 per cent to 3.75 per cent this year. US stock markets were closed for the Good Friday holiday. Until the start of a US war with Iran drove up global oil prices more than 50 per cent, investors had anticipated that the expected confirmation of Fed chair nominee Kevin Warsh later this year would lead to at least some rate easing. Warsh is US President Donald Trump's pick to replace current Fed Chair Jerome Powell, who the president has pressured for rate cuts since returning to office. The war changed that calculus, with markets for a while anticipating rate hikes before settling on the current view of an extended pause as the Fed sees whether rising energy costs cause a bigger shock to inflation or a bigger shock to growth if firms and households pull back on spending. The March jobs report doesn't shed light directly on that debate. Hourly wages rising at a 3.5 per cent annual rate, for example, are in the range that Fed officials consider roughly consistent with their 2 per cent inflation target. But it does show life in the job market beyond the "low-hire, low-fire" dynamic that Fed officials say has characterised the US economy for much of the past year, an equilibrium that left them uncomfortable that the relatively low unemployment rate could quickly grow worse. Yet even as the number of people in the labour force dropped by around 400,000 to 170 million, the lowest since Trump returned to office and instituted tough immigration policies, businesses found new hires among the ranks of the unemployed, which fell by more than 300,000, and also by pulling people into the job market. Bureau of Labor Statistics data showed the number of people moving from "not in the labour force" directly into a job increased by 140,000 from February to March. The unemployment rate fell to 4.3 per cent from 4.4 per cent the month before, remaining in a range of 4 per cent to 4.5 per cent where it has been since June of 2024. The March report may say little about the risks ahead. The US began bombing Iran on Feb 28, and the surveys for the March jobs report would not have reflected changes in hiring or spending triggered by a conflict that continues to disrupt global oil supplies. Inflation data for March will be released next Friday, another point in the Fed's assessment ahead of its Apr 28-29 meeting. "The US labour market continues to be resilient, defying even the harshest skeptic," said Jamie Cox, managing partner for Harris Financial Group. "The bad news is, if the labour market remains this stable, it will be very difficult to justify further rate cuts." REUTERS