The February job creation figure was particularly weak with only 33000 new jobs created, so there was a measure of relief when the March number came in at 196000, beating analysts’ predictions of between 170000 and 180000. The February reading was upwardly adjusted from an initial reading of just 20000. As is often the case, the unemployment rate seems to be disconnected from the job creation figures. It came in at 3.8%, unchanged from the previous month’s level. The explanation is that the unemployment figure is based on those out of work, registered as unemployed and actively looking for work. The commonly held view amongst economists is that an unemployment figure below 5% represents “full” employment. The consequence of this is that wages ought to be forced upwards as employers need to offer better conditions to attract new hires from a dwindling resource pool. However, this yet to exert a significant effect: the annual (year-on-year) wage rise fell back to 3.2% in March from the February level of 3.4%.
US inflation is currently running at 1.9% (year-on-year to March) up from the February reading of 1.5% which was a 30-month low. This is in line with the Federal Reserve target figure of 2%, so it is not a concern that could drive interest rates higher, by any means. It also should imply that Americans have more disposable income since headline inflation is running below wage inflation.
President Trump has breached protocol by suggesting that the Fed should cut interest rates in a bid to boost economic growth and should cease its policy of “quantitative tightening”. The Fed is slowly trying to divest itself of assets that were purchased during quantitative easing without generating a Bear market for assets. QE was an extreme measure used to boost bank lending and thereby improve money supply to businesses at the height of the Global Financial Crisis when interest rates had already been cut to historic low values.