With the latest U.S. Non-Farm Payrolls (NFP) data report released on Good Friday, the 7th of April 2023, market participants saw the U.S. economy create 236,000 jobs in March, the lowest number since December of 2020, and in line with general market consensus estimates.
While another upside surprise could have sparked expectations for further potential rate hikes amidst an ongoing battle against inflation, market participants will be highly relieved to see a noticeable tick-down in employment data “after unusually mild weather and seasonal factors led to strong job gains in the first two months of the year.” With Federal Reserve Chair Jerome Powell informing the market that officials had indeed considered a potential pause in rate hikes in the most recent FOMC meeting and annual U.S. CPI falling to 6% for February, down from January’s annual figure of 6.4%, market participants will remain hopeful that an end to the rate-hiking cycle is near, especially if March’s inflation data indicates a continued downtrend in general price levels.
Amidst several other factors, the FED’s recent aggressive rate-hiking cycle led to the second-largest bank failure in American history as Silicon Valley Bank succumbed to “a classic bank run,” sparking fears of financial contagion and systemic failure. Following the collapse of Silicon Valley Bank, Jerome Powell admitted that Reserve Bank officials were heavily considering a pause in the FED’s rate-hiking cycle. As indicated by the latest U.S. NFP data report for March 2023, cooler employment data has strengthened the case for rate caution. As market participants digest the latest employment data, all eyes will turn to March’s CPI data report and the FED’s following interest rate announcement to gauge how Jerome Powell aims to bring inflation down to its 2% target rate.
Sources: Bloomberg, Trading Economics, U.S. Bureau of Labor Statistics
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