Unemployment rose in February: What does this mean for the Fed? Will interest rates come down?
The US economy added 275,000 jobs in February, exceeding expectations, and unemployment remains under 4%. Will the Fed cut rates at the next meeting?
The Bureau of Labor Statistics reported that the US economy added 275,000 jobs in February, exceeding economists’ expectations of 198,000. The figure was more than the revised number in January of 229,000 and the monthly average in 2023 of 255,000.
Unemployment remained below 4 percent, where it has been for the past two years, the longest stretch in over five decades. However, it did creep up from 3.7 percent to 3.9 percent, but is still showing signs of a healthy labor market.
As for earnings, average hourly wages ticked up 0.1 percent in February and are currently 4.3 percent over the past twelve months. All in all, with the data taken together, “Not too hot, not too cold. Just right,” said Mark Zandi, chief economist at Moody’s Analytics.
Unemployment rose in February: What does this mean for the Fed? Will interest rates come down?
This latest economic data will be studied by policymakers at the central bank as they prepare to meet for two days beginning 19 March. It is widely expected that the Federal Reserve will leave the federal funds rate unchanged when they wrap up on Wednesday 20 March.
The Federal Reserve has been watching the economic data as it comes in to determine its interest rate policy to get inflation back to its target of 2 percent. Monthly data has shown solid job gains and unemployment remaining low and wage growth strong but not as frothy as in 2022.
Starting in March 2022 it began hiking rates aggressively to rein in the highest inflation in four decades peaking at 9.1 percent in June 2022. But it has refrained from raising rates since its meeting in July 2023 as prices increases have slowed.
Now investors want to know when policymakers will begin to lower interest rates. That isn’t expected until June unless there is a rapid slowdown and a spike in unemployment, in which case policymakers may move up any potential interest rate cuts. So far though, it appears that the Federal Reserve has pulled off a soft landing by bringing inflation down without throwing the US economy into recession.