Will the pace of US hiring slow?

Will the pace of US hiring slow?

Hiring in the US is forecast to have slowed in March following two months of strong gains that have helped make the case for the Federal Reserve to keep interest rates high, even in the midst of turmoil in the banking sector.

The labour department is expected to report on Friday that the US added 240,000 jobs in March, according to economists polled by Reuters, down from the 311,000 jobs added in February and less than half the 517,000 added in January. The unemployment rate is expected to be steady at 3.6 per cent, while average hourly earnings are expected to be up 0.3 per cent month on month, a tick up from the rate in February.

The data will be a crucial part of the Fed’s deliberations when it next meets, in May. Odds in the futures market are split on whether the US central bank will raise interest rates one more time, or whether the 0.25 per cent increase in March was the last in its hiking cycle.

While market expectations for another raise had been tempered by the US banking system’s woes, those fears have begun to recede and evidence of persistent inflation may spur the Fed to tighten further. Kate Duguid

Will the Antipodeans signal the end for global rate rises?

Global investors are looking to interest rate decisions in Australia and New Zealand this week for a potential indication of just how quickly central banks might end the current regime of rapid rate rises.

Investor expectations of continued tightening by central banks, including the US Federal Reserve, have waned in the wake of recent banking sector ructions. Markets are now suggesting more than one rate cut by some nations before the end of this year.

Economists polled by Bloomberg expect the Reserve Bank of Australia to hold its cash rate steady at 3.6 per cent on Tuesday after repeatedly boosting the benchmark over the past 12 months from a starting point of just 0.1 per cent.

Josh Williamson, chief Australia economist at Citigroup, said that if the RBA did keep rates on hold, “we expect the policy statement to keep optionality around possible further increases, at least until the details of the [consumer price index] show moderation in items where prices are a function of domestic demand”.

But he added it was “highly unlikely the RBA would loosen financial conditions with the labour market operating ahead of full employment and with households sitting on substantial savings buffers”.

The rates decision from the Reserve Bank of New Zealand on Wednesday could also act as a spoiler for those looking for an imminent end to global rate rises. Economists expect the RBNZ to raise rates at least once more, by 0.25 percentage points, to 5 per cent. Hudson Lockett

How resilient is German industrial production?

German industrial production is expected to have expanded in February, continuing the strong rebound registered in January.

Economists polled by Reuters are forecasting growth of 0.4 per cent between January and February after rising 3.5 per cent in the previous month.

January’s big rebound has raised expectations “that industry may continue to hold up well in the face of the energy crisis”, said Franziska Palmas, senior Europe economist at Capital Economics. In January manufacturing output was only 1.6 per cent below its level just before Russia’s invasion of Ukraine, “a fairly good outcome considering the severity of the energy crisis”, said Palmas.

She estimated that if industrial production remained at January levels in February and March, it would rise by 1.9 per cent in the first quarter as a whole.

The figures would confirm that German production is rebounding from the plunge at the end of 2022, which contributed to the country’s economic contraction, boosted by lower gas prices and the easing of supply chain disruption.

Industrial orders in the eurozone’s manufacturing powerhouse, released on Wednesday, are also expected to show a 0.5 per cent expansion in February following 1 per cent growth in the previous month.

Industrial production data for France and Spain, also published this week, will indicate how broad-based the expected resilience of the eurozone manufacturing sector is.

Sylvain Broyer, economist at the rating agency S&P Global, thinks that the current order levels across eurozone factories suggest that they still have five months of assured production. “Alongside lower prices for industrial and energy commodities, this should ensure industrial production remains steady until the summer,” he said. Valentina Romei