Evelyn Reynolds

Friday’s nonfarm payrolls report is expected to show growth of 198,000 and the unemployment rate holding steady at 3.7%.
A jobs market that remains red-hot could deter the Federal Reserve from cutting interest rates this year as expected.
In its most recent survey of economic conditions, the Fed found that the ultra-tight labor market has loosened somewhat, but there are still active pockets.

A workers stocks the shelves in a CVS pharmacy store on February 07, 2024 in Miami, Florida. 
Joe Raedle | Getty Images

Job growth in the U.S. likely decelerated in February while still a long way from stall speed as companies continue to keep up demand for workers.
When the Labor Department releases the nonfarm payrolls report Friday at 8:30 a.m. ET, it’s expected to show growth of 198,000 and the unemployment rate holding steady at 3.7%, according to Dow Jones consensus estimates.

If the forecast is close to accurate, it would mark a considerable downshift from January’s explosive growth of 353,000, but still representative of a fairly vibrant labor market.
“This is kind of a cautious labor market. Employers are hiring to keep pace with business activity,” said Julia Pollak, chief economist at ZipRecruiter. “Many businesses still report higher than expected sales. But they’re not aggressively hiring for growth and to expand. For that, many are still taking a wait-and-see approach.”
January’s surge followed a robust gain of 333,000 in December, seemingly countering the picture of an apprehensive hiring climate.
However, Pollak noted that both numbers were inflated from seasonal distortions, where retailers in particular cut fewer holiday jobs than expected. February, though, could see growth as high as 240,000, as companies look to fill an elevated level of open positions, Pollak said.

Too much growth?

ZipRecruiter’s quarterly job-seeker survey showed expectations for the medium-term outlook hitting a series high, while applicants also indicated stronger levels of confidence in their financial wellbeing and current state of the labor market.

Under normal conditions, those would all be positive attributes. But there are other concerns now.
A jobs market that remains red-hot could deter the Federal Reserve from cutting interest rates this year as expected. Earlier this week, Atlanta Fed President Raphael Bostic expressed concern about potential “pent-up exuberance” that could be unleashed in the business community after the central bank starts easing.
“Once rate cuts begin, that will give a boost to certain industries that they’ve been waiting for, especially when it comes to capital investments,” Pollak said. “Many companies are still holding back and waiting. Manufacturing will be a very interesting one to watch. There has recently been a bit of an improvement in durable goods manufacturing job openings. The checks are in the mail.”
Markets expect the Fed to start cutting rates in June, though the outlook has become less certain in recent weeks as policymakers weigh the direction of inflation.
Despite the uncertainty over monetary policy, companies have forged ahead with hiring.

There have been mixed signs regarding layoffs. This was the biggest February for announced layoffs since 2009, according to Challenger, Gray & Christmas, but workers seem to be able to find other jobs quickly, as evidenced by little change in the weekly jobless claim filings with the Labor Department.
The department’s Job Openings and Labor Turnover Survey for January, released earlier this week, showed layoffs actually decreased over the month and were down nearly 16% from a year ago. Job openings were little changed on the month but decreased 15% from the same period in 2023. Vacancies outnumbered available workers 1.4 to 1, down from 1.8 to 1 on the year.
“I haven’t seen layoffs,” said Tom Gimbel, founder and CEO of LaSalle Network, a staffing and recruiting firm. “What I keep seeing is the small- and mid-market going after market share, and the hiring seems to come in that bracket. They’re hiring the people that the bigger companies, specifically Big Tech, are laying off.”

Demand still strong

Indeed, a steady procession of layoffs at tech giants has attracted headlines recently. The trend continued into February, as employment placement site Indeed reported a 28% slide in job postings for software development and a 26% plunge in information design and documentation.
But other sectors are still showing demand. Job postings surged 102% for physicians and surgeons, 83% for therapists and 82% for civil engineering.
In its most recent survey of economic conditions, the Fed found that the ultra-tight labor market has loosened somewhat, but there are still active pockets.
“Businesses generally found it easier to fill open positions and to find qualified applicants, although difficulties persisted attracting workers for highly skilled positions, including health-care professionals, engineers, and skilled trades specialists such as welders and mechanics,” the Fed said in its “Beige Book” report released Wednesday.
The report precedes each Fed meeting by two weeks and helps inform policymakers on trends across the economy. Business contacts noted that wages are continuing to rise, though at a slower pace. Wage gains are an important piece of the inflation puzzle.
Friday’s report is expected to show average hourly earnings up just 0.2% on the month, down from a 0.6% jump in January, though still increasing at a 4.4% pace. The big monthly move in January came largely from a decline in the average work week, which elevates the appearance of average hourly earnings.
Even with the hotter than expected inflation numbers, Fed Chair Jerome Powell said Thursday that the central bank is “not far” from gaining enough confidence in the trajectory of inflation to start cutting rates.
“A lot of the hourly wage increases were driven by two things primarily: more liberal municipalities, and a scarcity of workers from Covid,” Gimbel said. “I don’t see a lot of wage growth this year.” More

Layoff announcements in February hit their highest level for the month since 2009, Challenger, Gray & Christmas reported Thursday.
With a series of high-profile layoff waves, tech leads the way this year in cuts with 28,218, though that number has fallen 55% from the same period a year ago.

More than 75 employers were taking resumes and talking to prospective new hires at a career fair in Lake Forest, CA on Wednesday, February 21, 2024. 
Paul Bersebach | Medianews Group | Orange County Register | Getty Images

Layoff announcements in February hit their highest level for the month since the global financial crisis, according to outplacement firm Challenger, Gray & Christmas.
The total of 84,638 planned cuts showed an increase of 3% from January and 9% from the same month a year ago, with technology and finance companies at the forefront.

From a historical perspective, this was the worst February since 2009, which saw 186,350 announcements as the worst of the financial crisis was seemingly coming to an end. Financial markets bottomed the following month, paving the way for the longest economic expansion on record, lasting until the Covid pandemic in March 2020.
For the year, companies have listed 166,945 cuts, a decrease of 7.6% from a year ago.
“As we navigate the start of 2024, we’re witnessing a persistent wave of layoffs,” said Andrew Challenger, the firm’s labor and workplace expert. “Businesses are aggressively slashing costs and embracing technological innovations, actions that are significantly reshaping staffing needs.”
With a series of high-profile layoff waves, tech leads the way this year in cuts with 28,218, though that number has fallen 55% from the same period a year ago. Layoff announcements at financial firms have risen 56% compared with the first two months of 2023.
Other industries planning significant cuts include industrial goods manufacturing (up 1,754% from a year ago), energy (up 1,059%) and education (up 944%).

The layoff numbers, however, are not feeding through to weekly jobless claims, suggesting that unemployment is short-lived and workers are able to find new positions. Initial filings for unemployment insurance totaled 217,000 in the most recent week, unchanged from the previous period and exactly in line with Wall Street estimates.
Challenger’s experts say companies most often cite restructuring plans as the main reason for the reductions in workforce. Artificial intelligence has been cited for just 383 cuts, though “technological updates” in general have been at the root of more than 15,000 reductions, or nearly as much as all the years combined since 2007.
“In truth, companies are also implementing robotics and automation in addition to AI. It’s worth noting that last year alone, AI was directly cited in 4,247 job reductions, suggesting a growing impact on companies’ workforces,” Challenger reported.

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The European Central Bank has once more held its key interest rates.
Staff projections now see economic growth of 0.6% in 2024, from a previous forecast of 0.8%.
They presented a more positive picture on inflation, with the forecast for the year brought to an average 2.3% from 2.7%.

The European Central Bank on Thursday lowered its annual inflation forecast, as its confirmed a widely expected hold of interest rates.
ECB President Christine Lagarde, meanwhile, suggested market pricing for a June rate cut was coming into line with policymakers’ outlook.

Staff projections for inflation in 2024 were updated to an average 2.3% from 2.7%. Looking ahead, staff see inflation hitting the ECB’s 2% target in 2025 and cooling further to 1.9% in 2026.
They meanwhile updated their forecast for economic growth for 2024 to 0.6% from 0.8%, as the euro zone’s economic activity escapes its current stagnation. They then project gross domestic product expansion of 1.5% in 2025 and 1.6% in 2026, slightly weaker than the December outlook.
“We are in the disinflationary process and we are making progress,” Lagarde said during a press conference on Thursday.
“We are more confident as a result, but we are not sufficiently confident, and we need more evidence, more data, and we know this data will come in the next few months. We will know a little more in April and a lot more in June.”
Policymakers have repeatedly signaled May as a key date, since wage settlements are set to be released that month.

The ECB will be “laser-focused” on two areas of inflation that could surprise, namely wage growth and profit margins, Lagarde said. There could also be a downside surprise to the outlook if monetary policy dampens demand more than expected or the global economic environment worsens unexpectedly, she added.

Expectations ‘converging’

The announcement increased market bets on rate cuts taking place in the summer of this year.
Market expectations had already shifted to a June cut in recent weeks. The ECB’s key rate is currently 4%, up from -0.5% in June 2022, following a run of 10 hikes.
Lagarde said Thursday that market pricing “seems to be converging better” with the ECB’s own view. Policymakers were earlier this year spurred to firmly push back on market bets on cuts in March or April.
Lagarde also said Thursday that the ECB would not need to wait for headline inflation to hit its 2% target before taking a decision.
Euro zone inflation eased to 2.6% in February from 2.8% in January. However, the core figure which strips out energy, food, alcohol and tobacco proved stickier, at 3.1%.

‘Relatively dovish’

Antonio Serpico, senior portfolio manager at Neuberger Berman, said that the most likely scenario involved rate cuts beginning in June of 25 basis points per meeting, for a total of 150 basis points or more in total.
“The numbers were quite reassuring actually, we were not expecting any cut today,” he told CNBC’s Silvia Amaro.
“Today’s decision looks to be relatively dovish,” he said, given that both growth and inflation forecasts moved lower.
“That means that the ECB governing council is seeing growth as more sluggish and lower than what they saw it before… and also in terms of headline inflation and core inflation, the new projections are definitely weaker than the older ones.”
The main variable will be the stickiness of core inflation, driven by a tight job market, he added.
Core inflation projections were updated to 2.6% in 2024 from 2.7%, and to 2.1% in 2025 from 2.3%. More

Private companies added 140,000 positions for the month, an increase from the upwardly revised 111,000 in January but a bit below the Dow Jones estimate for 150,000, ADP reported.
Leisure and hospitality led with 41,000 new jobs, construction added 28,000 and trade, transportation and utilities contributed 24,000.
ADP’s report precedes the Labor Department’s more closely watched nonfarm payrolls release, which happens Friday.

People work at a restaurant at Chelsea Market in Manhattan on February 02, 2024 in New York City. 
Spencer Platt | Getty Images

Private sector job growth improved during February though growth was slightly less than expected, payrolls processing firm ADP reported Wednesday.
Companies added 140,000 positions for the month, an increase from the upwardly revised 111,000 in January but a bit below the Dow Jones estimate for 150,000.

Job gains came across multiple areas, led by leisure and hospitality with 41,000 and construction, which added 28,000 positions. Other industries showing solid gains included trade, transportation and utilities (24,000), finance (17,000) and the other services category (14,000).
Of the total, 110,000 came from the services sector while goods producers added 30,000. Growth was concentrated among larger companies, as establishments with fewer than 50 employees contributed just 13,000 to the total.
Along with the job growth, annual pay increased 5.1% for those staying in their jobs, which ADP said was the smallest increase since August 2021, a potential indication that inflation pressures are receding.
The report comes with the labor market getting added attention for signals of whether U.S. economic growth will stall this year after gross domestic product posted a solid 2.5 percent annualized gain in 2023.
“Job gains remain solid. Pay gains are trending lower but are still above inflation,” said ADP chief economist Nela Richardson. “In short, the labor market is dynamic, but doesn’t tip the scales in terms of a Fed rate decision this year.”

ADP’s report precedes the Labor Department’s official nonfarm payrolls release, which happens Friday. In recent months, ADP has consistently undershot the closely watched report from the Bureau of Labor Statistics, which showed an increase of 353,000 in January, more than triple the ADP estimate.
Economists surveyed by Dow Jones are expecting Friday’s report to show an increase of 198,000. More

Egypt’s pound hit a record low against the dollar on Wednesday after its central bank hiked interest rates by 600 points and devalued the currency.
The country’s key interest rate now stands at 27.25%, the central bank said Wednesday.

Yousef Gamal El-Din | CNBC

Egypt’s pound hit a record low against the dollar on Wednesday after its central bank hiked interest rates by 600 points and devalued the currency.
The steps were meant to facilitate an agreement with the International Monetary Fund, which is expected to confirm the extension of its current $3 billion financial support package for Egypt.

The Egyptian pound was trading at roughly 50 to the dollar following the announcement, from 30.85 previously, according to LSEG data. The country’s key interest rate now stands at 27.25%, the central bank said Wednesday.
The development “shows that policymakers are committed to the turn back toward economic orthodoxy. This is likely to pave the way for an IMF deal within hours,” James Swanston, a Middle East and North Africa economist at London-based Capital Economics, wrote in a research note.
“This appears to be a positive step for Egypt on the path out of its current crisis,” he wrote.
This is a breaking news story, and it is being updated. More

Turkish annual consumer price inflation soared to 67.07% in February, the Turkish Statistical Institute said Monday, coming in above expectations.
The combined sector of hotels, cafes and restaurants saw the greatest annual price inflation increase at 94.78%, followed by education at 91.84%.
The strong figures are fueling concerns that Turkey’s central bank, which had indicated last month that its painful eight-month long rate hiking cycle was over, may have to return to tightening.

The Maslak financial and business center in the Sariyer district of Istanbul.
Ayhan Altun | Moment | Getty Images

Turkish annual consumer price inflation soared to 67.07% in February, the Turkish Statistical Institute said Monday, coming in above expectations.
Analysts polled by Reuters had anticipated annual inflation would climb to 65.7% last month.

The combined sector of hotels, cafes and restaurants saw the greatest annual price inflation increase at 94.78%, followed by education at 91.84%, while the rate for health stood at 81.25% and transportation at 77.98%, according to the statistical institute.
Food and non-alcoholic beverage consumer prices jumped 71.12% in February year-on-year and recorded a surprisingly large monthly rise of 8.25%.
The monthly rate of change for the country’s inflation from January to February was 4.53%.
The strong figures are fueling concerns that Turkey’s central bank, which had indicated last month that its painful eight-month long rate hiking cycle was over, may have to return to tightening.
“The stronger-than-expected rise in Turkish inflation to 67.1% y/y in February adds to our concerns given that it comes on the back of a large increase in inflation in January and the strength of household spending growth in Q4,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a research note on Monday.

“Core price pressures continue to run hot and if this continues, the possibility of a restart to the central bank’s tightening cycle will only increase in the coming months,” he said.
Some analysts predicted an eventual fall in inflation down to around 35% by the end of this year. According to Capital Economics, the latest figures “highlight that inflation pressures in the economy remain very strong and suggest that the disinflation process has taken a setback at the start of this year.”
Turkish Finance Minister Mehmet Simsek was cited by Reuters as saying that the country’s inflation would remain high in the first half of the year “due to base effects and the delayed impact of rate hikes,” but that the print would come down in the next 12 months.
Persistently high inflation has been fueled by Turkey’s dramatically weakened currency, the lira, which is at a record low against the dollar. The lira was trading at 31.43 to the greenback around noon local time on Monday. The Turkish currency has lost 40% of its value against the dollar in the past year, and 82.6% in the last five years.
“Obviously a disappointing set of inflation prints this morning,” Timothy Ash, emerging markets strategist at BlueBay Asset Management, wrote in a note. The Turkish central bank, he said, “has been trying to wind down the protected FX-linked deposit accounts and the need to rebuild FX reserves.”
He added that this development has “continued to put downward pressure on the lira,” creating an inflation pass-through.
Analysts note that Turkey’s policymakers wanted to avoid raising rates again, especially ahead of the country’s local elections on March 31. But relentlessly rising inflation may force them to hike again after the vote. Turkey’s key interest rate is currently at 45%, following a cumulative increase of 3,650 basis points since May 2023.
“Hopefully favourable base period effects should begin to create a more virtuous cycle from mid year. The CBRT might though need to further hike policy rates after local elections,” Ash wrote. More