(Bloomberg) -- The unexpected pickups in US hiring and wages last month increase chances the Federal Reserve will hold interest rates high for longer and potentially keep the door open to an 11th straight hike in June.
Nonfarm payrolls rose 253,000 last month, a Bureau of Labor Statistics report showed Friday. Economists had expected an increase of 185,000. The unemployment rate fell back to a multi-decade low of 3.4%.
Fed Chair Jerome Powell, speaking in a press conference Wednesday after officials wrapped up their May 2-3 meeting, said the labor market remains “extremely” tight and is one of the data points he and his colleagues will be carefully assessing as they determine whether more hikes are needed to cool the economy.
“The Fed left the door open to additional rate hikes for a reason,” Diane Swonk, chief economist at KPMG LLP, said after Friday's release. “This data is not as reassuring on a pause as we would like.”
The Fed has raised rates aggressively over the past 14 months, bringing interest rates to a range of 5% to 5.25%, but has indicated it may pause and hold them high from now. Powell said that easing inflation and tighter credit conditions following bank collapses may give the Fed room to assess the impact of their policy on the economy.
While Friday's report reinforces the notion that a key part of the economy remains resilient and may be able to withstand further tightening, policymakers will see another labor-market reading and several inflation reports before their June 13-14 meeting.
Financial-market estimates, which see a rate cut as early as September, continue to be out of line with forecasts from the Fed, where none of the 18 policymakers see a reduction this year.
“It reduces the odds of cuts and reinforces higher for longer,” Neil Dutta, head of economics at Renaissance Macro Research LLC, said of the jobs report.
(Updates with economist comment in fourth paragraph.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
