MARCH 13, 2023 – JOB STRENGTH CONTINUES AS FED SAYS RATES MAY HAVE TO RISE HIGHER
The US economy added 311,000 new jobs in February in the face of despite slowing economic growth and rising interest rates. The unemployment rate rose to 3.6 percent from 3.4 percent in January. The increase is attributable to more people entering the job market. Wage growth was unchanged from January.
The strength in employment is surprising as the impact of rising rates was expected to put a damper on hiring as well as on the economy as a whole. Employers have 10.8 million open jobs, which is nearly double the number of unemployed looking for work.
The Fed has lifted rates more over the last year than any time since the 1980’s to a range of 4.5 percent to 4.75 percent. Last week, Fed Chair Powell said officials were keeping their options open on whether rates will go up by 0.25 or 0.5 percent this month. He added the strength in hiring and persistent inflation are likely to lead them to raise rates to higher levels than previously anticipated.
Following Powell’s remarks, investors now expect rates to rise to between 5.5 percent and 5.75 percent this year. The probability of a half-point hike at the March 21-22 meeting has risen to 63 percent. The next anticipated increase could be put in doubt though with the recent bank turmoil.