Too much of a good thing can be bad for the U.S. Federal Reserve. The unemployment rate for Americans fell to 3.6% in March, near pre-pandemic levels. Meanwhile, dining out is back and even travel is returning to normal. It all gives the central bank room to raise interest rates to fight inflation. But continued robust hiring may make price pressures worse.
who passed through U.S. Transportation Security Administration checkpoints in the last seven days of March reached 90% of the level seen in the same week of 2019.The return toward pre-pandemic normality - even in a period coinciding with Russia's disruptive invasion of Ukraine - makes the Fed’s job easier. Central bank boss Jerome Powellhas recently taken on a more hawkish tone, highlighting that the labor market is strong enough to hike rates by 0.
Still, hiring patterns suggest imbalances remain. In February, job vacancies were still near record levels at 11.3 million while there were on average 60 unemployed persons for each 100 of those positions, compared to 80 in February 2020. The pace at which people quit their jobs remained high at 4.4 million, with retail, hotels and restaurants continuing to see the biggest exodus.
The fight for scarce workers could put more pressure on prices. Hourly wages increased 5.6% over the year to March, against pre-pandemic bumps in the 3% range. Full employment would be welcomed by the Fed after the labor market pains induced by the pandemic. Up to a point, so would higher wages, especially for lower-paid workers. But blowing past that would risk overheating an economy already grappling with inflation.- The U.S.
- With upward revisions of 95,000 additional jobs for January and February, the economy added an average of 562,000 positions per month in the first quarter of 2022.Editing by Richard Beales and Sharon LamOpinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.Sign up to our investor newsletter to get the latest news and trends in global financial markets.
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