- Economists predict a rise in job growth in Feb a little less but still better than in previous years.
- Fed’s policies to change raising rates only to tame inflation.
- It is expected that there will be 1.9 job openings per unemployed.
Feb unemployment rate in the U.S. is likely expected to be low. It is also expected that job growth will also be slowed and in the wake of all this the Federal Reserve raising interest rates to a higher level for the long term shall tame inflation.
The job growth slowdown that started after January led financial markets to expect that the monetary policy could tighten into summer. It is also expected on Friday the Labor Department’s report is to show an upward trend with tight job markets.
Further, it is also expected that U.S. central bank will increase rates a little extra by a 50-basis point hike this month said Jerome Powell the Federal Bank Chair.
According to Sung Won Sohn, finance and economics professor at Loyola Marymount University in Los Angeles, the cooling trend has begun and should continue even though the labor market is tight right now.
Last month there was increase in payrolls of nonfarm where the jobs added by 205,000 last month which is still half of the 517,000 in January as per survey. It is still double the 100,000 jobs per month as needed to keep the growth of working age population since December 2020 which is still smallest gain comparatively.
There were several factors such as unseasonable warm weather, benchmark revisions, extra generous factors of adjustment, and the model to track fluctuations which flattered the job growth in January as per economists.
The estimated payrolls range for February shall range from 78,000 to 325,000. It is also expected that the average earnings on an hourly basis shall rise by 0.3% as much as January.
“January payrolls benefited from an extremely low seasonal hurdle, minus 3 million jobs, while February requires the addition of at least 770,000 jobs in order to record a positive payroll number,” said Ellen Zentner, chief U.S. economist at Morgan Stanley in New York. “With labor market indicators pointing towards labor hoarding, less seasonal hiring fluctuation should drag February jobs numbers.”
In order to get a better view of the labor market according to economists it is recommended to have look at average payrolls for three and six months. This for February has 300,000+ gains in jobs during three and six average months.
“This would indicate the anticipated normalization in the labor market is taking longer than expected,” said Jan Groen, chief U.S. macro strategist at TD Securities in New York.
As per data for January every unemployed person has 1.9 job openings and the labor market is to reported to be solid in February scattered reports of layoffs were noted while it also said that finding skilled or experienced workers was also a challenge. All this was reported in Fed’s “Beige Book”.
The increase in Fed policy rate by 450 points from near zero to the current 4.50%-4.75% since last March and Fed’s March 21-22 are priced in the 50-basis-point hike by financial markets as per CME Group’s FedWatch tool. The rate is forecasted to remain unchanged at 3.4% since May 1969 of unemployment.
“The problem is the mismatch. There are locational and skills mismatches, which basically means the labor market is not functioning efficiently,” said Brian Bethune, an economics professor at Boston College.
“We need to address that inefficiency and that’s the main challenge. The Fed has to be careful about how they interpret what’s going on in the labor market.”
“We’re still in a very unusual labor market,” said Bethune. “I really don’t see how they (Fed) can accomplish the inflation objective by inducing a major slowdown in the economy.”
Thus, concluding all this Fed’s policies and new economic changes appear to be very favorable for job markets in the US. It is suggested to be very hopeful with respect to job market in the coming month.
