Unemployment in the U.S. increased from 3.7% to 3.9% last month, according to data released Friday by the Bureau of Labor Statistics. At the same time, total nonfarm payroll employment rose by 275,000.
This might be an indicator that President Joe Biden’s State of the Union announcement that “the landing is and will be soft,” for the economy coming out of the COVID-19 pandemic will ring true.
Nick Bunker, the economic research director for North America for Indeed Hiring Lab, said that doesn’t mean the labor market is on unsteady ground, per a report in Barron’s.
According to CNBC, the report came as the market was on edge about the impact economic growth might have on monetary policy. Barron’s said the rise in the unemployment rate was higher than expected, and the report overall was good news as far the Federal Reserve Bank is concerned.
“The data were broadly positive for Federal Reserve officials looking to see the labor market holding up without creating inflationary pressures,” said the outlet.
In an effort to deal with inflation seen since the COVID-19 pandemic disrupted the economy, the Fed instituted several interest rate hikes. Federal Reserve Bank Chairman Jerome Powell told Congress this week that inflation has eased, but that the Fed is still aiming for a 2% target.
During the latest 12-month period tracked by the BLS, inflation was up to 3.1%. According to Powell, the labor market remains tight, but demand conditions are becoming more balanced. Over the past two years, the strong labor market “helped narrow long-standing disparities in employment and earnings across demographic groups,” said the Fed chair.
“We remain committed to bringing inflation back down to our 2% goal and to keeping longer-term inflation expectations well anchored,” Powell explained. “Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run.”
CNBC said that the jobs numbers reported Friday were likely to keep the Fed on track for interest rate cuts this year. It said the timing of those cuts remains uncertain, though Dan North, senior economist at Allianz Trade Americas, expects the first cut may not come until July.
Barron’s said the consensus among economists surveyed by FactSet was that unemployment would remain at 3.7%. Economists surveyed by the Dow Jones were also looking for payroll growth of 198,000, per CNBC.
“Stocks rose Friday following the news, with the Dow Jones Industrial Average up nearly 150 points in early trading,” said CNBC. “Treasury yields moved lower; the benchmark 10-year note was last at 4.07%, down about 0.02 percentage points on the session.”
Barron’s also noted that “wage growth, a metric that many economists and Federal Reserve officials are watching closely for signs of cooling, was slower than expected,” and that the jobs report was “all over the place.”
Seema Shah, the chief global strategist at Principal Asset Management, said that if the U.S. economy continues to add jobs at a healthy pace without triggering a resurgence in wage growth, the Fed can achieve its soft landing, as cited by the outlet. She also thinks the earliest possible time for an interest rate cut would be mid-year.