By Chris Dorrell
The US economy continued to surprise pundits with yet another blowout jobs report raising question marks for the Federal Reserve ahead of its latest interest rate decision next week.
The world’s largest economy added 272,000 jobs in April, according to the latest health-check on the jobs market.
This was a big acceleration on last month’s 175,000 and well ahead of economists’ expectations. Experts thought around 185,000 jobs would be created.
“Employment continued to trend up in several industries, led by health care; government; leisure and hospitality; and professional, scientific, and technical services,” the Bureau of Labor Statistics said.
Average hourly earnings were up 4.1 per cent on last year, also ahead of expectations.
However, unemployment climbed up slightly to four per cent, the highest level since January 2022. Economists had expected it to remain flat at 3.9 per cent.
“The Federal Reserve is in somewhat of a bind at the moment,” Richard Carter, head of fixed interest research at Quilter Cheviot said.
“The level of interest rates feels restrictive enough that it should be having an impact on economic activity, however, while the unemployment rate has ticked up, US businesses show little appetite to slow down,” he continued.
The dollar strengthened immediately after the figures were released while yields on US Treasuries also rose as markets digested what the figures mean for the Fed ahead of its meeting next week.
The Fed is almost certain to leave interest rates on hold next week given its concerns about the potential persistence of inflation.
Price pressures have proved much more stubborn than expected so far this year with the Fed acknowledging in its last meeting that there has been “a lack of further progress toward the Committee’s two per cent inflation objective”.
The most recent round of figures showed inflation had come in slightly below expectations at 3.4 per cent, but policymakers will be looking for clearer evidence that inflation is decisively under control.
Markets do not expect the Fed to cut interest rates until at least September, although some expect it to wait even longer given the strength of the US economy.
