Economy

Nonfarm payrolls grew by 431,000 in March, a bit below the 490,000 estimate and well under February’s upwardly revised 750,000.
The unemployment rate declined to 3.6%, below expectations.
Despite the miss, the first quarter ended with nearly 1.7 million jobs added.
Leisure and hospitality led the gains, followed by professional and business services and retail trade.

Amid soaring inflation and worries about a looming recession, the U.S. economy added slightly fewer jobs than expected in March as the labor market grew increasingly tighter.
Nonfarm payrolls expanded by 431,000 for the month, while the unemployment rate was 3.6%, the Bureau of Labor Statistics reported Friday. Economists surveyed by Dow Jones had been looking for 490,000 on payrolls and 3.7% for the jobless level.

An alternative measure of unemployment, which includes discouraged workers and those holding part-time jobs for economic reasons fell to a seasonally adjusted 6.9%, down 0.3 percentage point from the previous month.
The moves in the jobless metrics came as the labor force participation rate increased one-tenth of a percentage point to 62.4%, to within 1 point of its pre-pandemic level in February 2020. The labor force grew by 418,000 workers and is now within 174,000 of the pre-pandemic state.
Average hourly earnings, a closely watched inflation metric, increased 0.4% on the month, in line with expectations. On a 12-month basis, pay rose nearly 5.6%, just above the estimate. The average work week, which figures into productivity, edged down by 0.1 hour to 34.6 hours.
“All in all, nothing shocking about this report. There was nothing that was really surprising,” said Simona Mocuta, chief economist at State Street Global Advisors. “Even if this report came in at zero, I would still say this is a very healthy labor market.”
As has been the case through much of the Covid pandemic era, leisure and hospitality led job creation with a gain of 112,000.

Professional and business services contributed 102,000 to the total, while retail was up 49,000 and manufacturing added 38,000. Other sectors reporting gains included social assistance (25,000), construction (19,000) and financial activities (16,000).
The survey of households painted an even more optimistic picture, showing a total employment gain of 736,000. That brought the total employment level within 408,000 of where it stood pre-pandemic.
Revisions from prior months also were strong. January’s total rose 23,000 to 504,000, while February was revised up to 750,000 compared with the initial count of 678,000. For the first quarter, job growth totaled 1.685 million, an average of nearly 562,000.
Among individual groups, the Black unemployment rate fell 0.4 percentage point to 6.2%, while the rate for Asians declined to 2.8% and to 4.2% for Hispanics.

Focus on the Fed

The numbers come with the economy at a critical juncture in its pandemic recovery phase. Though hiring on the top line has been strong, there remains a gap of about 5 million more job openings than available workers.
Growth as measured by gross domestic product is expected to be minimal in the first quarter. An inventory rebuild last year that helped propel the biggest yearly gain since 1984 is tapering, and multiple factors kept advancements in check to start 2022.
The biggest attention-getter has been inflation, running at its fastest pace since the early 1980s and helping constrain consumer spending as wage gains haven’t been able to keep up with prices. At the same time, the war in Ukraine has dampened sentiment and added to supply chain issues. And rising interest rates are showing signs of slowing the red-hot housing market.
To combat inflation, the Federal Reserve is planning a series of interest rate hikes that further would slow growth.
Markets now are anticipating rate increases at each of the six remaining Fed meetings this year, likely starting with a half percentage-point move in May and continuing to total 2.5 percentage points before 2022 comes to a close.
There was little in Friday’s report that would alter that outlook.
“The wage picture is critical,” said Mocuta, the State Street economist. “The report doesn’t really change the short-term trajectory, the idea that we’re going to get a few hikes in a row. If indeed you get confirmation that the wage growth is slowing at the margins, that maybe allows the Fed to reassess.”

Hospitality looks for a turnaround

The hospitality industry has been among the hardest hit during the pandemic. While hiring has continued at restaurants, bars, hotels and the like, challenges remain.
Some 90,000 establishments closed in 2021, while sales were off about 7.5% from pre-pandemic levels, according to the National Restaurant Association. The industry remains about 1.5 million jobs below the February 2020 level, with an unemployment rate that nevertheless tumbled to 5.9% in March, down 0.7 percentage point from the previous month.
Dirk Izzo, president and general manager of NCR Hospitality, said the industry is using a variety of tactics to survive. Technology has been a big factor in the pandemic world, with companies coping with a lack of workers by turning to hand-held devices, QR-coded menus and other implements to improve customer service.
“We’re saying that they’re having a really hard time staffing fully both the front of the house and the back of the house,” Izzo said. “They’ve actually taken tables out of the restaurants because they can’t find the staff.”
Establishments that have run out of government subsidies are shutting down, while those remaining open are having to raise prices to combat inflation.
Nevertheless, he said there’s an air of optimism that with the pandemic easing and people returning to their regular behaviors, the industry can rebound.
“I think people are going to come back from this stronger than before,” Izzo said. “They’re going to have to put more technology in. I do think it’s going to be a positive for the industry. It’s just going to be a bumpy road.”

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Federal Reserve officials are tasked with fostering “full employment,” and while it has been difficult to guess what that means as the economy recovers from huge job losses at the start of the pandemic, March hiring data seemed likely to reaffirm to policymakers that the labor market is running hot.Now, central bankers are hoping conditions settle into a more sustainable balance.The jobless rate declined to 3.6 percent in March from 3.8 percent in February, data released Friday showed. Unemployment is rapidly closing in on the 3.5 percent unemployment rate that prevailed before the pandemic.The unemployment rate continued to fall in March.The share of people who have looked for work in the past four weeks or are temporarily laid off, which does not capture everyone who lost work because of the pandemic. More

The US recorded another month of jobs growth in March as higher wages lured more workers back to the labour force, giving the Federal Reserve another data point supporting an aggressive tightening policy to tame inflation. Employers in the world’s largest economy added 431,000 jobs last month, according to the Bureau of Labor Statistics, a cooler pace than the upwardly revised 750,000 positions created in February and less than Bloomberg’s consensus forecast of 490,000 jobs. The unemployment rate was 3.6 per cent, a 0.2 percentage point drop from the level in February and the lowest level since before the pandemic. The data also showed a pick-up in monthly wage growth after a surprising slowdown in February. Average hourly earnings registered a 0.4 per cent monthly gain, translating to a 5.6 per cent increase from the same period last year, as businesses continue to compete for talent and rush to fill a near-record number of job vacancies. For every unemployed person, there are roughly 1.7 openings.As wages have increased and concerns over the Covid-19 pandemic have receded, the share of Americans either employed or looking for work has crept higher, but remains shy of pre-pandemic levels. The shortfall narrowed marginally in March, with the labour force participation rate edging up 0.1 percentage point to 62.4 per cent. In February 2020, it stood at 63.4 per cent.The yield on the US 2-year Treasury note, which is more sensitive to monetary policy expectations, was up 0.13 percentage points to 2.41 per cent, having traded at 2.39 before the release of the data.The jobs data were collected as Russia’s war in Ukraine escalated sharply, triggering a surge in the prices of oil and other commodities. Despite heightened uncertainty and soaring costs the US labour market remains extremely tight by historical standards. At a press conference in mid-March following the first interest rate increase since 2018, Jay Powell, chair of the Federal Reserve, warned the labour market was “tight to an unhealthy level” and expressed concern about the potential feed through of higher wages to price pressures.With inflation running at the fastest pace in 40 years, the US central bank has signalled its plans to steadily tighten monetary policy after two years of highly stimulative settings. Officials have expressed a clear willingness to increase the pace further and deliver this year at least one half-point rate rise — something it has not done since May 2000. Most policymakers expect rates to approach 2 per cent by the end of the year from the current range of 0.25 per cent to 0.50 per cent, according to the latest projections, and eventually rise to 2.8 per cent in 2023. That is above the median estimate of the “neutral” rate and suggests a policy stance that begins to restrict economic activity.Despite a tighter fixing, members of the Federal Open Market Committee and other bank branch presidents do not believe their efforts to tame inflation will lead to a sharp rise in unemployment or cause a recession. The bond market has been flashing a possible warning sign for the US economy after the inversion this week of one widely watched portion of the yield curve, which tracks the difference between two-year and 10-year Treasury yields. More

The BCBS constitutes 45 members, including central banks and bank supervisors, tasked with strengthening the regulation, supervision and policies of banks across the world.Macklem, currently serving as the governor of the Bank of Canada, will hold the position for a term of three years, the Group of Governors and Heads of Supervision (GHOS) said. The appointment comes at a time when several top central banks across the world are looking to raise interest rates and withdraw COVID-19 pandemic era stimulus amid a rapid rise in inflation.Macklem succeeds France’s central bank chief François Villeroy de Galhau, who has held the role since November 2019. Earlier this year, the Bank for International Settlements (BIS) appointed Villeroy as its new Board chair for a three-year term until 2025.The BIS, which hosts BCBS, is dubbed the central bank to the world’s central banks, as it handles some of their transactions and holds regular behind-closed-doors meetings for top monetary policymakers to discuss the global economy. More

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(Reuters) -Global bond funds drew their first weekly inflow in about three months in the week ended March 30, as a dip in oil prices tempered some concerns over inflation during the week. According to Refinitiv Lipper, global bond funds received $3.5 billion in the week to March 30, their first weekly inflow since Jan. 5. However, they faced outflows of $108.22 billion in the first quarter of the year, the biggest since the first quarter of 2020. In the week to March 30, European bond funds saw inflows worth $5.77 billion, however, the U.S. and Asian bond funds faced outflows. Global high yield bond funds drew inflows worth $1.3 billion, while government and inflation-linked bond funds received $1.2 billion and $1.1 billion respectively.Global equity funds saw their second successive weekly inflow, receiving $464 million, however, it was much smaller than the previous week’s inflow of $19.67 billion. They received about $70 billion in the first quarter of 2022, compared with $191.45 billion in the fourth quarter of 2021.Among sector funds, tech and industrials led inflows, receiving $974 million and $181 million respectively.Meanwhile, money market funds pulled in $16.5 billion in net buying after two consecutive weeks of outflows. In the commodities sector, investors poured $670 million in precious metal funds, which was their 11th straight week of net buying. Energy funds, on the other hand, faced outflows worth $241 million. Emerging market equity funds attracted $3 billion, their biggest inflow since Feb. 9, while emerging market bond funds received $1.75 billion, after four straight weeks of outflows. More

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FRANKFURT (Reuters) – Euro zone inflation surged to 7.5% in March, hitting another record high with months still left before it is set to peak, raising pressure on the European Central Bank to rein in runaway prices even as growth slows sharply. Consumer price growth in the 19 countries sharing the euro accelerated from 5.9% in February, Eurostat said on Friday, far beyond the 6.6% expected, as war in Ukraine and sanctions on Russia pushed fuel and natural gas prices to record highs. Although energy was the chief culprit, inflation in food prices, services and durable goods all came in above the ECB’s 2% target, further proof that price growth is increasingly broad and not merely a reflection of expensive oil. With the ECB having persistently underestimated inflation over the past year, the figure will come as a shock to policymakers, some of whom are already calling for tighter policy to avoid high price growth becoming entrenched. “The inflation data speak for themselves,” Joachim Nagel, president of the German Bundesbank, said on Friday. “Monetary policy should not pass up the opportunity for timely countermeasures.”The central bank governors of Austria and the Netherlands have already called for rate hikes this year, worried that rapid price growth is becoming broad-based, an argument supported by underlying data from Friday’s release.Inflation excluding volatile food and fuel prices, closely watched by the ECB, picked up to 3.2% from 2.9% while a narrower measure that also excludes alcohol and tobacco products jumped to 3.0% from 2.7%.Any cut in Russian gas supplies would also quickly feed through to customers, boosting prices even as governments are putting in place subsidy measures to offset some of the cost. ECB Chief Economist Philip Lane acknowledged that inflation is very high but said there were opposing forces at work and the euro zone central bank should take its time analysing the data.”We have the energy shock, the prospects of second-round effects, pushing up inflation,” Lane told CNBC”On the other hand, the weakening of sentiment, the fact that real incomes will suffer with the high energy prices, especially over a one- to two-year horizon, will have a negative pressure on the inflation outlook.” INFLATION SOARS, GROWTH STAGNATES All this leaves the ECB with a difficult policy dilemma.Its main task is to get inflation to 2% but tightening policy now would risk crashing an economy that is already reeling from the fallout of the war in its neighbour and the lingering impact of the COVID-19 pandemic. The ECB estimates that growth in the first quarter was positive, but barely, while second-quarter growth will be near-zero, as high energy prices dent consumption and hurt corporate investment. High energy prices are traditionally a drag on growth and will thus actually weigh on inflation once the immediate spike passes, raising the risk that price growth will later fall back below target. But the ECB can hardly ignore high inflation, especially since it says the peak is still three to four months away.The euro zone’s labour market is the tightest it has been in decades so wage inflation, a precondition of durable consumer inflation, is already in the pipeline. And ECB inaction would also boost inflation expectations, likely making price growth more permanent. The likely compromise will be for the bank to tighten monetary policy this year, but by the smallest increments. Markets are now pricing in 60 basis points of rate hikes by the end of the year but policymakers have been more cautious, with not a single one calling for moves so large. The risk, however, is that big inflation surprises could force the ECB to tighten more quickly and play catch-up later on. More