U.S. labor market rapidly tightening; unemployment rate drops to 3.6%

Record ID: 1666657

  • Title: U.S. labor market rapidly tightening; unemployment rate drops to 3.6%
  • Date: 1st April 2022
  • Summary: RICHMOND, VIRGINIA, UNITED STATES (April 1, 2022) (REUTERS) (SOUNDBITE) (English) RIVERFRONT INVESTMENT GROUP GLOBAL FIXED INCOME, CIO, KEVIN NICHOLSON SAYING: “At the next FOMC [Federal Open Market Committee] meeting, I do believe that the Fed will raise that Fed funds rate by 50 basis points, based upon what we saw this morning and the economic data that has been comin
  • Embargoed: 15th April 2022 17:59
  • Keywords: Fed Jobs business economy employment unemployment yield curve
  • Location: VARIOUS
  • Topics: Economic Events,Equities Markets
  • Reuters ID: LVA009900401042022RP1
  • Aspect Ratio: 16:9
  • Story Text: U.S. job growth continued at a brisk clip in March, with the unemployment rate falling to a new two-year low of 3.6% and wages re-accelerating, positioning the Federal Reserve to raise interest rates by a hefty 50 basis points in May.
    “I do believe that the Fed will raise Fed funds rate by 50 basis points based upon what we saw this morning and the economic data that has been coming through over the last couple of weeks.” said RiverFront Investment Group Global Fixed Income CIO, Kevin Nicholson in Richmond, Virginia.
    The Labor Department's closely watched employment report on Friday (April 1) also showed employment in professional and business services, financial activities and retail sectors was now above pre-pandemic levels.
    It underscored solid momentum in the economy as it faces headwinds from inflation, tighter monetary policy as well as Russia's war against Ukraine, which is further straining global supply chains and adding to price pressures.
    The Fed last month raised its policy interest rate by 25 basis points, the first hike in more than three years. Policymakers have been ratcheting up their hawkish rhetoric, with Fed Chair Jerome Powell saying the U.S. central bank must move "expeditiously" to hike rates and possibly "more aggressively" to keep high inflation from becoming entrenched.
    “The unemployment rate being as low as 3.6% as it posted this morning, it is telling us that the job market is healing very well and that we are actually getting people back into the job market.” said Nicholson.
    The survey of establishments showed that nonfarm payrolls increased by 431,000 jobs last month. Data for February was revised higher to show 750,000 jobs added instead of the previously reported 678,000. Overall employment is now 1.6 million jobs below its pre-pandemic level.
    Economists polled by Reuters had forecast payrolls increasing 490,000. Estimates ranged from as low as 200,000 to as high as 700,000.
    The employment report further dispelled financial market fears of a recession following slight inversions of the widely tracked U.S. two-year/10-year Treasury yield curve this week.
    But Nicolson says U.S. two-year/10-year Treasury yield curve has been “manipulated so much with financial engineering over the last couple of years, that is no longer sending the signal that it once did,” and now he is more focused on the three-month/10-year curve to determine whether or not we are entering a recession.
    “And that curve has continued to spread. So, from that standpoint, I think that we're several years away from having a recession,” said Nicolson.
    Economists said the Fed's massive holdings of Treasuries and mortgage-backed securities made it hard to get a clear signal from the yield curve moves. Some noted that real yields remained negative, while others argued that the three-month /10-year Treasury yield curve was a better indicator of a future recession.
    (Production: Kyoko Gasha)
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