The Mainstay Capital Management CEO argues the Fed will be ‘very cautious’ and there won’t be rate cuts for some time.
All eyes will be on the February jobs report when it is released Friday morning as investors look for clues about the labor market’s health in the face of higher interest rates and still-high inflation.
The Labor Department’s high-stakes February payroll report, due at 8:30 a.m. ET, is projected to show that hiring increased by 200,000 last month and that the unemployment rate held steady at 3.7%, according to a median estimate by Refinitiv economists.
That would mark a decrease from the blockbuster 353,000 gain in January and the average monthly gain of 255,000 recorded in 2023.
“Payroll gains far exceeded forecasts in January, due in part to annual revisions, but are poised to return to a more sustainable pace in February,” said Aaron Terrazas, Glassdoor chief economist.
NUMBER OF HIGH-PAYING JOBS IS DWINDLING
A jobseeker attends a Veteran Employment and Resource Fair in Long Beach, California, on Jan. 9. (Eric Thayer / Bloomberg / Getty Images)
The Federal Reserve is closely watching the report for evidence that the labor market is finally softening after months of surprisingly solid job gains as policymakers try to ensure that progress on reducing inflation does not stall. Officials have suggested that fast wage growth — the product of a strong labor market — was a contributing factor to the inflation crisis that ravaged millions of Americans’ pocketbooks over the past few years.
Slower job growth and further moderation in wage gains could be a welcome sign for the U.S. central bank, which has signaled plans to cut interest rates this year once it is certain that inflation is tamed.
WHY ARE GROCERIES STILL SO EXPENSIVE?
Average hourly earnings, a key measure of inflation, are expected to increase 0.3% for the month and climb 4.4% from the same time one year ago.
“The February jobs report should assuage fears of re-accelerating economic growth and inflation,” said Lydia Boussour, EY chief economist. “Job growth and wage momentum likely cooled in tandem after a strong start to the year.”
The labor market has remained historically tight over the past year, defying economists’ expectations for a slowdown. Economists say it is beginning to slow after last year’s blistering pace but is still nowhere near breaking.
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A separate report released Thursday by Challenger, Gray & Christmas found that the pace of job cuts by U.S. employers accelerated in February.
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Findings from the firm indicate that companies planned 84,638 job cuts in February, a 3% increase from the previous month and a 9% jump from the same time last year. It marked the highest layoff total for February in data going back to 2009.
“As we navigate the start of 2024, we’re witnessing a persistent wave of layoffs. Businesses are aggressively slashing costs and embracing technological innovations, actions that are significantly reshaping staffing needs,” said Andy Challenger, senior vice president at Challenger, Gray & Christmas.
The data points to a labor market that is moderating in the face of growing headwinds.
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