Significantly fewer jobs were created in the USA compared to February and January. The unemployment rate, on the other hand, was lower than expected.
US Job Growth Slows Down in March, but the Leisure and Hospitality Sector Thrives
The US job market cooled off in March. 236,000 new non-farm jobs were added, after 326,000 in February and 472,000 in January, the Washington government announced on Friday. Economists polled by the Reuters news agency had predicted 239,000 new jobs. A particularly large number of jobs were created in the private sector, 72,000 in the leisure and hospitality industry alone. The unemployment rate was also slightly lower than expected at 3.5 percent.
Fed’s Rate Hike Strategy Questioned as Service Sector Loses Momentum
In addition to inflation, the development of the labor market also determines whether the US Federal Reserve will raise its key interest rate further. It has rocketed interest rates from near zero to a range of 4.75 to 5.00 percent in a year to quell high inflation and cool the overheated labor market. She wants to achieve a soft landing in the economy. However, the latest data indicate that the important service sector has now lost a noticeable amount of momentum and that the industry is going down more sharply. This has fueled fears of a recession.
It is uncertain whether the key interest rate will rise further at the next Fed meeting in early May given the uncertain economic outlook. Fed Chairman Jerome Powell has signaled that the Fed will be guided by economic data and will feel its way from meeting to meeting. US Treasury Secretary Loretta Mester recently told Bloomberg TV that it was too early for an assessment.
Cleveland Fed chief hints at more rate hikes to sustain inflation target
In a previous speech, however, the head of the Cleveland Fed district had hinted that the end of the road for hikes might not yet be reached. In order to sustainably push inflation towards the Fed’s target of 2.0 percent, interest rates would have to be raised “slightly further” this year into the restrictive range that is slowing down the economy. To do this, it is necessary for the key monetary policy rate to rise above the five percent mark.