Aurelia Butler

Before policymakers begin to ease borrowing costs, they say they want to see more data confirming that inflation is returning to the U.S. central bank’s 2% target. Here’s a recap of recent key data watched by the Fed:EMPLOYMENT (Released April 5; next release May 3):U.S. firms added a larger-than-expected 303,000 jobs in February, and employment gains in the previous two months were revised up by 22,000. The unemployment rate fell unexpectedly to 3.8%, marking the 26th straight month below 4% – the longest such run since the 1960s – and prompting Richmond Fed President Thomas Barkin to remark: “That’s a quite-strong jobs report.” Fed officials have become more comfortable with the idea that continued strong job growth could still allow inflation to fall, especially if the supply of labor continues to grow and wage growth eases. Both did in March: The workforce grew by 469,000, the most since August, and annual wage growth eased to 4.1%, the lowest rate of increase since June 2021. Still, that rate is above the 3.0%-3.5% range that most policymakers view as consistent with the Fed’s 2% inflation target. JOB OPENINGS (Released April 2, next release May 1)Fed Chair Jerome Powell keeps a close eye on the U.S. Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) for information on the imbalance between labor supply and demand, and particularly on the number of job openings available to each person who is without a job but looking for one. The ratio had been falling steadily towards its pre-pandemic level, but since October has remained in the 1.35-1.43 range, higher than the 1.2-to-1 level seen before the health crisis. The number fell in the most recent release, for February, as the number of people seeking work rose, pushing up the unemployment rate.Other aspects of the survey, like the quits rate, have edged back to pre-pandemic levels. INFLATION (PCE released March 29; next release CPI on April 10):The personal consumption expenditures (PCE) price index, which the Fed uses to set its 2% inflation target, increased at a 2.5% annual rate in February, up from the 2.4% rate seen in January. Core inflation stripped of volatile food and energy prices rose 2.8%, a slight decline from the upwardly revised 2.9% in January. Neither number is likely to boost confidence among Fed policymakers that inflation will steadily return to their target. The CPI had risen 3.2% on a year-on-year basis in February, up from 3.1% in the prior month, and higher than analysts expected. The core rate excluding food and energy costs, meanwhile, only edged down to 3.8% from 3.9%, another reminder that the Fed’s inflation battle may last longer than anticipated. Rising gasoline and shelter costs contributed the bulk of the CPI increase. Whether the Fed’s hoped-for consistent easing in housing costs is imminent remains uncertain. More

This article is an onsite version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesFor up-to-the-minute news updates, visit our live blogGood evening.Another stellar US jobs report, following last week’s higher than expected inflation figures, has further damped down expectations of early interest rate cuts in the world’s largest economy. American employers added 303,000 jobs in March, much higher than the 200,000 expected by economists, while the unemployment rate dipped to a lower than anticipated 3.8 per cent. Growth was particularly strong in healthcare, leisure and hospitality, and construction, as well as in government jobs.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Bond yields rose on the news as investors dialled down their bets on how many rate cuts the Federal Reserve might make this year and when that process might begin.Fed chair Jay Powell emphasised on Wednesday that the central bank’s fight against inflation was “not done” and that more proof was needed that price pressures were easing before rate cuts could be considered, a view echoed by other policymakers. A rise in oil prices from tensions in the Middle East is also fuelling investor expectations, in Europe as well as in the US, that rates are likely to stay higher-for-longer.The employment figures provide a much-needed boost to President Joe Biden who has put his record on jobs at the heart of his bid for re-election in November.  “Today’s report marks a milestone in America’s comeback,” the president said, touting the more than 15mn jobs created since he took office. “That’s 15mn more people who have the dignity and respect that comes with a pay cheque.”The problem for Biden, the FT editorial board reminds us, is that American voters still seem to put more faith in his rival Donald Trump to handle the economy. Strong headline economic numbers such as today’s jobs figures mask large differences in the lived experiences of households and businesses across the country, it argues.“Dig beneath the surface and the country’s economic weaknesses — and its political divides — become clearer,” the FT concludes. “For a nation the size of a continent, with vast inequalities, aggregate data is obscuring. As markets place bets on the US economy and politicians campaign, it pays to break it down.”Need to know: UK and Europe economyUK train passengers face more disruption as train drivers launch new strikes. These charts help explain the state of the country’s railways after a long period of quiet renationalisation.Railways in the rest of Europe have problems of a different kind: they’re being targeted by Russian hackers.Wage growth expectations in UK businesses have hit a near-two-year low, according to a Bank of England poll, easing pressure on policymakers as they gear up for the “final mile” of their battle against inflation.Trade groups hit out at UK plans to charge fees of up to £145 for plant and animal products imported from the EU. In true Brexit style, writes Peter Foster, the charges come at the eleventh hour, after five delays and a flip-flop over whether they’d be needed at all. Politicians however are still running scared from discussing the impact of Brexit on the British economy, the subject of the latest FT film.Video: We need to talk about Brexit | FT Film Police in Italy and several other European countries arrested 22 people and seized assets worth €600mn in connection with alleged fraud involving the EU’s post-pandemic recovery fund.House prices across the EU fell for the first time for a decade last year, as strong growth in eastern and southern countries was offset by declines in northern states. In the UK, prices fell in March, ending a five-month stretch of consecutive increases, according to lender Halifax, although separate data suggests the London property market is rebounding.Need to know: global economyUS treasury secretary Janet Yellen warned that Washington would not allow a glut of Chinese production to wipe out American manufacturers of green technology. The global supply of equities is shrinking at the fastest rate in decades as economic and political uncertainties lead to fewer new share sales and more corporate buybacks. The boss of one of the City’s biggest independent investment banks sounded the alarm over London’s markets, saying they will end up “dead” on current trends.Amid painstaking international negotiations on the text of the world’s first pandemic treaty, our Big Read explains why an agreement has been so hard to reach.Zimbabwe launched a new currency backed by the country’s gold reserves in the latest attempt to tackle decades of monetary chaos and the collapse of the Zimbabwe dollar.Japan has been celebrating the end of a 20-year deflationary cycle but still faces serious demographic problems. The Rachman Review podcast discusses whether the country is at a turning point.Need to know: businessSamsung Electronics, the world’s largest maker of memory chips, is expecting a 10-fold jump in first-quarter operating profit as prices recover from last year’s severe downturn.Google is considering charging for new “premium” features powered by generative artificial intelligence, marking the first time the company has put any of its core products behind a paywall. Commodity trading profits hit a record $104bn last year, according to a McKinsey report, even as markets calmed and earnings at some of the biggest groups fell. The war in Ukraine has pushed up prices and supercharged profits while returns have also risen from power trading.The five-centuries old Royal Mail is on a modernisation drive as the UK’s former postal monopoly invests in robotic procedures to fend off rivals such as DPD, Evri, DHL and UPS. Don’t forget though, that robots have rights too. A German court has ruled that even fully automated stores must obey the constitutional principle of Sonntagsruhe or Sunday rest.Science round-upMember states of Cern, the European Organisation for Nuclear Research, are discussing a historic expansion proposal: building a factory to produce and study the Higgs boson — the so-called god particle that gives mass to planets, stars and life.Novo Nordisk, Eli Lilly and others are racing to develop the next generation of weight loss drugs. In the meantime, scientists continue to uncover spin-off effects: trials show Sanofi’s lixisenatide appears to slow the impact of Parkinson’s disease.New research suggests global deaths from prostate disease will almost double in 20 years. Scientists says countries need to overhaul testing to focus more on vulnerable groups.A fall in vaccination rates among expectant mothers has led to a resurgence in whooping cough in England. FT contributing editor Adam Tooze bemoans governments’ lack of investment in vaccines, an area with an unbeatable cost-benefit ratio.Our Big Read details how Africa, a net importer of food, could one day help feed the world’s growing population.Could snakes become the next superfood? Anjana Ahuja explains how their recently discovered high-speed evolutionary process has herpetologists in a tizzy.Man-made climate change may be affecting global timekeeping as the melting of ice sheets in Greenland and Antarctica slows the Earth’s rotation. Some good newsDespite the disruption of the pandemic era, overall global life expectancy has continued to improve, thanks to breakthroughs in combating lethal problems such as diarrhoeal and typhoid diseases.Recommended newslettersWorking it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from work & careers editor Isabel Berwick. Sign up hereThe Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up hereThanks for reading Disrupted Times. If this newsletter has been forwarded to you, please sign up here to receive future issues. And please share your feedback with us at [email protected]. Thank you More

NEW YORK (Reuters) – U.S. bond giant PIMCO has trimmed its expectations for interest rate cuts by the Federal Reserve this year to two after data on Friday showing the U.S. economy created more jobs than expected last month, said a portfolio manager.”We did have two to three cuts this year and our base case now is most likely two cuts this year,” Mike Cudzil, a managing director and generalist portfolio manager at the asset management firm, told Reuters.U.S. nonfarm payrolls grew by 303,000 jobs in March compared with expectations for an increase of 200,000, data showed on Friday. The figures come on the heels of a series of reports showing U.S. economic activity is proving more resilient to high interest rates than many had predicted.”Directionally this means a little bit less out of the Fed, and that’s a good thing, the economy is proving for now that it can handle higher rates,” Cudzil said.U.S. Treasury yields jumped after Friday’s jobs data as the market continued to trim back expectations of rate cuts this year. Expectations for a first 25 basis point rate cut in June stood at 51% on Friday, down from 59% on Thursday, CME Group (NASDAQ:CME) data showed.PIMCO has been underweight duration in portfolios over the past few months as it deemed the market was too optimistic on rate cuts this year, Cudzil said. Duration is a measure of a bond portfolio sensitivity to changes in interest rates.Earlier this year traders expected a total of 150 basis points of cuts in 2024, and that is now down to 67 basis points, which is more in line with the asset manager’s expectations on the path of interest rates, Cudzil said.”I think it makes sense to get closer to neutral and if anything we’re looking potentially at when we should get overweight on duration,” he said.Fed officials projected last month three 25 basis point rate cuts this year, even if only by a small margin.Others in the market on Friday continued to stick to previous calls of three rate cuts this year because they anticipate inflation will moderate despite strong job growth.”While exceptionally strong, the employment report is consistent with the Fed starting to ease this year in June,” analysts at BofA Securities said in a note. “A jump in labor supply can allow for stronger growth without overheating effects,” they said.Rick Rieder, BlackRock’s chief investment officer of global fixed income, said an expansion of the workforce was positive for the economy as long as it kept wages contained.Still, he said, Friday’s jobs report put more emphasis on inflation readings over the next few months to assess the path of interest rates this year.”Expectations have got to be somewhere between two to three cuts, and I think that today’s data moves the needle ever so slightly towards two,” he said. More

Nonfarm payrolls increased by 303,000 jobs last month, the Labor Department’s Bureau of Labor Statistics said in its closely watched employment report on Friday. Data for February was revised slightly lower to show 270,000 jobs added instead of 275,000 as previously reported.Economists polled by Reuters had forecast 200,000 jobs, with estimates ranging from 150,000 to 250,000.MARKET REACTION:STOCKS: S&P 500 e-mini futures pointed to a higher open on Wall StreetBONDS: The U.S. Treasury 10-year yield rose 8.9 basis points to 4.398%; Two-year yields rose 7.2 basis points to 4.7127%FOREX: The dollar index rose 0.4% to 104.65COMMENTS:TIM GHRISKEY, SENIOR PORTFOLIO STRATEGIST, INGALLS & SNYDER, NEW YORK”It’s very strong payrolls data… well above the prior month and well above expectations. So it really just shows this is a very strong economy. A strong economy provides less need for the Fed to lower interest rates, and we’ve seen that impact in the stock market over the past several weeks. Fed speak has been more ‘hawkish,’ meaning they are not in any hurry to lower rates. It’s smart. They are keeping their ammunition for when it’s needed.”ART HOGAN, CHIEF MARKET STRATEGIST, B RILEY WEALTH, NEW YORK”While we continue to consider the non farm payroll number as the most important piece of data every month, it really takes a backseat to inflation. We continue to be surprised by the number of jobs this economy can produce on a monthly basis entering the year.””The good news in the report is that the unemployment remains below 4% and then the year-over-year increase in wages remains in or about 4.1%. So wages are up not as much as they were at the end of last year so that’s good news. There’s no inflationary pressure in this jobs report, so I think that’s the key takeaway.”CHRIS LARKIN, MANAGING DIRECTOR TRADING AND INVESTING, E*TRADE FROM MORGAN STANLEY, NEW JERSEY”Today’s big upside surprise in the jobs report may not have closed the door on a June rate cut, but there’s a little less daylight coming through than there was a day ago. This will make next week’s CPI and PPI even more important.””For months, the stock market has brushed off almost every troublesome bit of data that has come its way, but if those inflation numbers come in hotter than expected for a third month in a row, it could dent the market’s confidence about the Fed’s commitment to cutting rates some time in Q3.”ANTHONY SAGLIMBENE, CHIEF MARKET STRATEGIST, AMERIPRISE FINANCIAL, TROY, MICHIGAN”This week’s data, including the employment report, complicates the Fed’s trajectory of maybe cutting interest rates here in the second half. Expectations for June have come down now after the hotter-than-expected employment number that is on top of a hotter-than-expected manufacturing data, a still an expanding services economy. So the economy is doing really, really well.””What investors are going to have to grapple with now is that the likelihood that the Fed is going to cut at that May or June meetings are probably off the table. We’ll get the we’ll get the inflation data next week and that’ll be really important.””What you’re going to see in the rate markets, which you’ve already seen and what you’re starting to see in the stock market, is investors are recalibrating to this idea that we might not get three rate cuts this year. It might be two, and you know, I think it’s too early to tell her.””If the economy is running the way it’s running now through most of this year, then it might be likely that the Fed does not cut interest rates this year. So that will be a change in expectations for investors.” GENNADIY GOLDBERG, HEAD OF US RATES STRATEGY, TD SECURITIES, NEW YORK”The numbers certainly beat expectations on headline, revisions, unemployment rate, average hourly earnings – there’s very few obvious blemishes to this figure so I think it is going to be hard for markets to ignore this particular print. The market is pushing Fed rate cut expectations a little bit further out on this reading, and of course you’re seeing Treasuries bear flatten on this report, so not surprising there.””The source of uncertainty is going to be geopolitics heading into the weekend, and the CPI print coming up next week. So, I do wonder how willing investors are going to be to stay short the rates market heading into a weekend of geopolitical uncertainty and with CPI coming up next week, especially with some of the FOMC speakers recently telling us to focus on CPI rather than economic data more broadly. It could be a bit of a choppy market from here.””I still think if inflation comes down June is still very much on the table for a first rate cut, but of course this very large number could make the Fed think twice about imminently cutting rates, especially if the economy is seemingly quite strong and they’re still adding jobs at a reasonable rate.”ALEX COFFEY, SENIOR TRADING STRATEGIST, TD AMERITRADE, CHICAGO”Huge move in yields, no doubt that’s the story for sure out of the gate and it makes sense especially after kind of the flight to quality yesterday that maybe was kind of a counter to the recent move that we’ve seen, which has been this reaction to hotter than expected data – inflationary economic et cetera.””But through the lens of how that ISM services set it up on Wednesday, it was a setup where good was bad and it seems like that’s the reaction that we initially got. But when you look at the inflationary piece of this, average hourly earnings year-over-year was in line with expectation, down from prior. Month over month though did heat up a little bit but it was in line with what the expectations were.””So a little bit hotter, especially given the fact that we did see average hours uptick slightly again too. Participation rate went up as well. But to me, it’s a pretty big beat on the headline figure with the 303 (thousand), so to me, this is just a good piece of data, but how well the market can stomach a good piece of data as they yearn for rate cuts to kick off early in the summer, and this pushes back on that quite a bit. This seems like one of those situations where after yesterday, it’s still going to be a pretty volatile day.”BEN LAIDLER, GLOBAL MARKETS STRATEGIST, ETORO, LONDON”This is now our fifth month over 200,000 new jobs. We were all hoping for a cooling labor market to open the door to early rate cuts and instead we may be getting the opposite. Certainly, for the June meeting, this report may well have closed that door.””Markets were braced for a hot report and I think they more than got it. I would fully expect this to be used as an opportunity to some sort of pull back here in the short term for stocks. Think the dollar will get bolstered, Bond yields well, which have been firm for a while will go further up.””This report has piled even more pressure on the two big numbers next week, which is the U.S. inflation report on Tuesday and I think expectations well be for a bad report there. But that certainly has the potential to write to the rescue a little bit.”KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS, PITTSBURGH”(The number) is somewhere in the range that people expect the Fed will still be able to lower interest rates at some point this spring. As weird as this sounds, March unemployment by be the thing saving today’s market.””And we sold off in anticipation of this yesterday, so we’re going to probably come back a little bit.”BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN”The labor market is the gift that keeps on giving jobs, but it’s coal for the bond markets. The fears in the markets shouldn’t be about stagflation. The fears are shifting to one of overheating. However, the job gains are in the most economically insensitive areas, like healthcare, so those fears are overblown.””Good job gains where wage gains are modest isn’t inflationary. The Fed doesn’t think it has to kill the economy to tame inflation. This does push out the date when cuts will make sense, but it doesn’t mean the Fed needs to reverse course and start hiking again.”PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK”This is a hot number again and unemployment ticked lower.””The real nitty gritty is what happens to hourly wages, which were basically in line with expectations, just slightly over 4%, on a year-to-year basis.””That means that while the fear of a further increase in overall inflation may diminish somewhat, nevertheless it’s a strong number.””This means June rate cut is now looking less likely, and the dilemma for the Fed continues.”DAVID WADDELL, CEO AND CHIEF INVESTMENT STRATEGIST, WADDELL & ASSOCIATES, NASHVILLE”The headlines are going to talk about unemployment rate being 3.8%, which is a beat but the meaningful data point with the report is average hourly earnings, which have now fallen down to 4.1% year over year, which is the lowest level since June of 2021.””So the employment report was hot, but it was a cooling inflation report and that’s why the market can digest it .. this doesn’t really change anything.”PAUL NOLTE, SENIOR WEALTH ADVISOR & MARKET STRATEGIST, MURPHY & SYLVEST WEALTH MANAGEMENT, ELMHURST, ILLINOIS”Everything in the numbers look good. Participation rate was up, hours worked were up. The reason the unemployment rate came down was because of more people coming into the labor force.””With this number and the prior numbers we’ve seen, it still indicate that the labor market is strong.””The revisions are the only thing that I’m looking for. We’ll find out a little bit more from some of the Fed governors that talk today.””We been in the camp that the Fed doesn’t cut rates at all because the economy is strong so this still fits within our framework of good employment data that should keep the Fed on the sidelines.”BRAD BECHTEL, GLOBAL HEAD OF FX, JEFFERIES, NEW YORK”It definitely pushes out rate cut expectations. You can see the market is already pricing after September now. That should continue to underpin dollar strength on a broad basis.””I don’t know that it’ll shake up the carry crowd and the carry narrative, so the high yield versus low yield theme that’s been prevalent throughout FX this year. I think that’s going to continue to be a popular trade at least through the summer, but the dollar will likely also remain supported just given this shift in rate cut expectations.” More