US job growth slowed in March as the Fed tightened

US job growth slowed in March, but not enough to deter the Federal Reserve from considering another rate hike as the central bank battles high inflation.

The world’s largest economy added 236,000 jobs last month, according to a report from the Bureau of Labor Statistics published on Friday, a step down from the upwardly revised 326,000 jobs gained in February and well below the 472,000 recorded in January. Most economists polled by Bloomberg forecast job gains of 230,000 in March.

Unemployment fell to 3.5 percent, just above a multi-decade low. Meanwhile, wage growth remained stable, with average hourly wages up a further 0.3 per cent in March after an increase of 0.2 per cent the previous period. On an annual basis, salaries have increased by 4.2 per cent.

US Treasuries came under selling pressure, with the politically sensitive two-year Treasury yield up 0.1[ads1]2 percentage points to 3.94 percent. The benchmark interest rate for 10 years rose 0.07 percentage points to 3.37 percent. Prices fall when interest rates rise.

The stock exchanges are closed in connection with Good Friday. Pricing in the futures markets indicated that investors continue to believe that the Fed has implemented its last rate hike of this cycle.

The jobs report follows other data this week that gave tentative signs that a yearlong effort by the Fed to tame inflation is starting to weigh on a historically strong labor market. Figures for jobless claims, which track new applicants for unemployment benefits, came in higher than expected on Thursday, and the numbers over the past 12 months were revised significantly higher as part of an annual review by the BLS.

U.S. job vacancies also fell sharply in February, data showed Wednesday, pushing the job vacancy rate for the unemployed down to 1.7 from 1.9.

Fed officials have long argued that it would take a period of “below-trend growth and some softening in labor market conditions” to bring inflation back to the central bank’s 2 percent target. Most policymakers, according to forecasts published last month, expect unemployment to rise to 4.5 percent this year and growth to slow to 0.4 percent as they advance their monetary tightening campaign.

After another quarter-point interest rate increase last month, the federal funds rate fluctuates between 4.75 percent and 5 percent. Most officials see it peaking between 5 percent and 5.25 percent this year and forecast no cut until 2024, suggesting markets are bracing for another quarter-point rate hike.

Complicating the outlook for the Fed, however, is the scale of the economic shock posed by the latest banking crisis. Jay Powell, the chairman, and other officials have suggested there is likely to be a credit crunch as lenders pull back, but the extent of the cutback is highly uncertain.

“Such a tightening of economic conditions would act in the same direction as a tightening of interest rates,” Powell said last month, adding that it could potentially amount to a “rate hike or maybe more than that”.

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