The US economy added 916,000 jobs in March and the unemployment rate edged down to 6 per cent in a sign that the recovery was accelerating in the month that Joe Biden signed his $1.9tn stimulus into law.
The non-farm payrolls data released on Friday exceeded economists’ expectations and marked a sharp improvement from the upwardly revised 468,000 jobs created in February and 233,000 positions created in January.
The improvement in the labour market has occurred amid optimism over America’s fight against the pandemic, as a winter surge in infections has ebbed and the rate of vaccinations picked up sharply.
In the past few weeks, Covid-19 cases have started to increase again but the pace of inoculation has continued to rise, raising hope of further improvement in coming months.
The March job gains were not only larger than in previous months, but more broadly based. Hiring in the leisure and hospitality sector, which has been especially sensitive to the ups and downs of the pandemic but drove last month’s job gains, slowed from a pace of 384,000 to 280,000.
But goods-producing employment, including manufacturing and construction, bounced back sharply, from job losses of 44,000 in February to a gain of 183,000 positions last month. Government hiring surged to 136,000 after shedding 90,000 jobs in February.
The report weighed on the prices of short-term government bonds, with some traders positioning for the prospect that a faster economic rebound could prompt the US central bank to tighten policy faster than previously thought. The yield on the two-year note, which has been anchored near zero, rose 0.03 percentage points to 0.19 per cent. It was one of the largest one-day increases in the yield on the note over the past year.
Future interest rates implied from Fed funds futures and eurodollars also climbed on Friday, underlining the shifts by investors.
“It seems to be the recovery [is] happening much more quickly than people thought could possibly move the Fed into a position where they may have to do something sooner rather than later,” Tom di Galoma, a managing director with Seaport Global Holdings, said. “The front-end is starting to price in a tightening.”
The economic recovery in recent months had predominantly hit long-term US Treasury debt, lifting yields on the 10-year note to more than 1.7 per cent. But Federal Reserve officials have not expressed any alarm over rising borrowing costs or even the likely surge in inflation this year, saying it is likely to be transient.
Long-dated US government bonds, which recently notched the worst quarterly performance since 1980, slid after the data was released.
The benchmark 10-year Treasury yield climbed 0.05 percentage points to 1.72 per cent in morning trading in New York, not far from the 14-month peak of 1.78 per cent reached earlier this week.
Five and seven-year Treasuries were also under pressure. The yield on the five-year note rose just under 0.08 percentage points to 0.98 per cent, while the 7-year traded 0.06 percentage points higher to 1.42 per cent.
Major stock markets globally, including US exchanges, are closed for the Easter weekend. Speaking before heading to Camp David for the holiday on Friday, Biden said the US still had “a long way to go to get our economy back on track” but the improvement was evident.
“My message to the America people is this: Help is here. Opportunity is coming”.
The strength of the jobs report was amplified by the decline of the unemployment rate from 6.2 per cent to 6 per cent, as more Americans found jobs and more looked for jobs, with the US labour force expanding by 347,000 people.
“The [rebound] still leaves employment 8.4m below its pre-pandemic peak from just over a year ago but, with the vaccination programme likely to reach critical mass within the next couple of months and the next round of fiscal stimulus providing a big boost, there is finally real light at the end of the tunnel,” said Paul Ashworth, chief US economist at Capital Economics.
Brian Levitt, global market strategist at Invesco, said the report was “confirmation of what we all were starting to pick up on some months ago, which was that the economy is accelerating and the vaccine rollout is a game changer”.
“You add on top of that the fiscal support [with] a lot of money set to be deployed . . . and as a result you are seeing businesses hire to address current demand and get in front of future demand.”
The recovery seen in the labour market has not erased the scarring caused by the pandemic, and investors expect the US central bank and the White House to continue to stimulate the economy given millions of Americans remain out of work.
“Today’s report confirms that labour market conditions are decidedly improving but reaching broad-based and inclusive full employment will be a multiyear process. As such, we expect the Fed to keep rates steady until mid 2023,” said Nancy Vanden Houten, lead US economist at Oxford Economics.
“People will focus on the fall in the unemployment rate but that number is not that relevant in terms of what the Fed is looking for,” added Gershon Distenfeld, the co-head of fixed income at AllianceBernstein. “What really matters is what does the economy look like when we open up? How much of the supply side has been damaged?”
The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
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Published Apr 18, 2024 • 2 minute read
(Bloomberg) — The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
“All eyes are on the US,” Kristalina Georgieva said in an interview on Bloomberg’s Surveillance on Thursday.
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The two biggest issues, she said, are “what is going to happen with inflation and interest rates” and “how is the US going to navigate this world of more intrusive government policies.”
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The sustained strength of the US dollar is “concerning” for other currencies, particularly the lack of clarity on how long that may last.
“That’s what I hear from countries,” said the leader of the fund, which has about 190 members. “How long will the Fed be stuck with higher interest rates?”
Georgieva was speaking on the sidelines of the IMF and World Bank’s spring meetings in Washington, where policymakers have been debating the impacts of Washington and Beijing’s policies and their geopolitical rivalry.
Read More: A Resilient Global Economy Masks Growing Debt and Inequality
Georgieva said the IMF is optimistic that the conditions will be right for the Federal Reserve to start cutting rates this year.
“The Fed is not yet prepared, and rightly so, to cut,” she said. “How fast? I don’t think we should gear up for a rapid decline in interest rates.”
The IMF chief also repeated her concerns about China devoting too much capital and labor toward export-oriented manufacturing, causing other countries, including the US, to retaliate with protectionist policies.
China Overcapacity
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“If China builds overcapacity and pushes exports that create reciprocity of action, then we are in a world of more fragmentation not less, and that ultimately is not good for China,” Georgieva said.
“What I want to see China doing is get serious about reforms, get serious about demand and consumption,” she added.
A number of countries have recently criticized China for what they see as excessive state subsidies for manufacturers, particularly in clean energy sectors, that might flood global markets with cheap goods and threaten competing firms.
US Treasury Secretary Janet Yellen hammered at the theme during a recent trip to China, repeatedly calling on Beijing to shift its economic policy toward stimulating domestic demand.
Chinese officials have acknowledged the risk of overcapacity in some areas, but have largely portrayed the criticism as overblown and hypocritical, coming from countries that are also ramping up clean energy subsidies.
(Updates with additional Georgieva comments from eighth paragraph.)
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Poland has EU’s second highest emissions in relation to size of economy Notes From Poland
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WASHINGTON (AP) — The head of the International Monetary Fund said Thursday that the world economy has proven surprisingly resilient in the face of higher interest rates and the shock of war in Ukraine and Gaza, but “there is plenty to worry about,” including stubborn inflation and rising levels of government debt.
“ Inflation is down but not gone,” Kristalina Georgieva told reporters at the spring meeting of the IMF and its sister organization, the World Bank. In the United States, she said, “the flipside” of unexpectedly strong economic growth is that it ”taking longer than expected” to bring inflation down.
Georgieva also warned that government debts are growing around the world. Last year, they ticked up to 93% of global economic output — up from 84% in 2019 before the response to the COVID-19 pandemic pushed governments to spend more to provide healthcare and economic assistance. She urged countries to more efficiently collect taxes and spend public money. “In a world where the crises keep coming, countries must urgently build fiscal resilience to be prepared for the next shock,” she said.
On Tuesday, the IMF said it expects to the global economy to grow 3.2% this year, a modest upgrade from the forecast it made in January and unchanged from 2023. It also expects a third straight year of 3.2% growth in 2025.
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The world economy has proven unexpectedly sturdy, but it remains weak by historical standards: Global growth averaged 3.8% from 2000 to 2019.
One reason for sluggish global growth, Georgieva said, is disappointing improvement in productivity. She said that countries had not found ways to most efficiently match workers and technology and that years of low interest rates — that only ended after inflation picked up in 2021 — had allowed “firms that were not competitive to stay afloat.”
She also cited in many countries an aging “labor force that doesn’t bring the dynamism” needed for faster economic growth.
The United States has been an exception to the weak productivity gains over the past year. Compared to Europe, Georgieva said, America makes it easier for businesses to bring innovations to the marketplace and has lower energy costs.
She said countries could help their economies by slashing bureaucratic red tape and getting more women into the job market.
Paul Wiseman, The Associated Press
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