The US employment report for the month of February that will be published today (Fri) before the opening of trading (15:30 Israel time) is attracting a lot of attention from investors. This is mainly due to its effect on the Fed’s interest rate policy. The stronger the data and indicate a tight labor market , increasing pressures for further interest rate hikes.
The expectation is for the addition of 205,000 jobs, and an annual salary increase rate of 4.7%. Last month the employment data surprised and dramatically exceeded the forecasts.
Even earlier, on Thursday, the US Bureau of Labor published the data on the available jobs in the US for the month of January. The report is a preliminary indicator of the labor market in the US together with the unemployment data that will be published today. From the report (JOLTS) it appears that the number of vacant jobs in the US decreased slightly last month. According to the data, the number of jobs is 10.8 million, while the number of jobs that decreased is 410 thousand or a decrease of 3.6%.
A decrease in the number of vacancies is a positive and encouraging figure for the US economy. The labor market is extremely crowded and tight, and this situation encourages upward wage pressure and thus can increase the price increase.
Even so, the current decline is probably not encouraging enough. Research Institute FACTSET estimated the number of vacancies at 10.58 million and a decrease of almost 6%. So the labor market does not relax sufficiently for the current interest rates. The bank takes into account the state of the employment market when deciding on interest rate increases and the current job vacancies data are not encouraging and increase the likelihood in the market of continued interest rate increases.
What will Powell’s response be?
These data come while the Chairman of the US Central Bank (Fed) Jerome Powell stood before the US Congress and talked about further interest rate hikes. Powell noted that an important factor in interest rate decisions is the tight labor market. In his testimony before Congress he said that “despite the decline we are seeing in GDP growth, the labor market remains extremely tight with unemployment rates the lowest since 1969.”
The interest rate in the US is now at a rate of 4.5%-4.75% and expectations in the market currently indicate an expectation of an increase of 0.5% according to the CME website in the next beat on March 22. This figure is extremely significant in view of the fact that the expectation was lower only last week when most expectations predicted An increase of only a quarter of a percent. The strengthening of the expectation for a more drastic increase comes in accordance with the hawkish words of the chairman of the Fed. Next week the US Bureau of Statistics will publish the inflation data in the country, so we are going to see how much inflation in the US has caught on and will continue to affect interest rates in the US.