NEW YORK (BLOOMBERG) - The US added close to half a million jobs in March and the unemployment rate fell by more than expected, highlighting a robust labour market that is likely to support more hawkish Federal Reserve policy in the coming months.
Non-farm payrolls increased 431,000 last month after an upwardly revised 750,000 gain in February, a Labour Department report showed on Friday (April 1). The unemployment rate fell to 3.6 per cent and the labour force participation rate ticked up. Wage gains accelerated.
The median estimate in a Bloomberg survey of economists called for a 490,000 advance in payrolls and for the unemployment rate to fall to 3.7 per cent.
Treasury yields edged higher, S&P 500 futures pared gains and the dollar strengthened after the release. The data suggest that the labour market recovery is continuing at a robust pace as employers have better success filling a near-record number of positions.
Inflation, shrinking excess household savings and solid wage growth are factors that could attract more Americans to jobs in the coming months. Covid-19 has also become less of a factor as states broadly lift restrictions.
Fed officials, including chairman Jerome Powell, have said in recent weeks that they would support more aggressive monetary policy to curb decades-high inflation, including a possible 50-basis-point hike at the next policy meeting in May.
Central bankers have repeatedly pointed to a strong labour market as one reason that the United States economy can handle a series of interest rate hikes that is expected to extend into next year.
"All signs are that this is a strong economy and, indeed, one that will be able to flourish, not to say withstand but certainly flourish, as well, in the face of less accommodative monetary policy," Mr Powell said on March 16, following the Fed's decision to raise rates for the first time since 2018.
Friday's report showed average hourly earnings rose 0.4 per cent from February and 5.6 per cent from a year ago, the most since May 2020. However, inflation - at the highest since the early 1980s - is outpacing wage growth, effectively dealing a pay cut to many Americans and starting to dent consumer demand.
Stocks and futures pared back gains as US payrolls came in below expectations. Contracts on US benchmarks advanced and Europe's Stoxx 600 was higher after its worst quarter since the pandemic bear market.
US-listed Chinese stocks gained in pre-market trading as the authorities in Beijing prepare to give US regulators full access to auditing reports of the majority of the 200-plus companies listed in New York.
Investors begin a new quarter wondering if the fighting in Ukraine, the isolation of Russia and the Fed's increasingly hawkish turn will engender still more volatility and losses for stocks and bonds. Raw materials are the only key asset class to deliver major gains so far in 2022.