US interest rates are set to rise next month despite slower jobs growth in the world’s largest economy.
Around 236,000 jobs were added in March, just shy of forecasts of 239,000 and down from 326,000 jobs added in February, according to the US Bureau of Labor Statistics.
The number was also well below the 472,000 jobs added in January as higher lending costs and a darker economic outlook weighed on the hiring plans of many businesses.
But the figures showed the American labour market was still robust, meaning it was unlikely to stop the Federal Reserve from considering another interest rate hike next month as it battles to bring down inflation.
The data also appeared to ease fears the US economy was about to slide into recession, with the yield on 10-year US government debt rising on the back of the news.
Fighting inflation: The job figures showed the American labour market was still robust, meaning it was unlikely to stop the Federal Reserve from considering another interest rate hike
The dollar, meanwhile, initially jumped in value against the pound before steadying back at around 80.5p.
The data also revealed US unemployment had dipped to 3.5 per cent during the month, against predictions it would hold steady at 3.6 per cent. Average hourly earnings, meanwhile, crept up 0.3 per cent – a slight acceleration from the previous reading of 0.2 per cent.
Andrew Hunter, deputy chief US economist at Capital Economics, said the sharp drop in jobs growth over the last three months showed that momentum was ‘now fading again’ and he expected the decline to continue. Stock markets in the UK and the US were closed yesterday to mark Good Friday, meaning the true reaction is unlikely to be felt until Monday when Wall Street reopens.
The Federal Reserve hiked interest rates by another quarter of a percentage point last month to a range of 4.75 per cent to 5 per cent but indicated it could pause further increases to avoid piling additional stress on the markets.
There are fears that raising rates too sharply could tip the economy into recession as tighter lending conditions make it harder for businesses and households to borrow.
Hunter said the data was ultimately ‘a mixed bag’ for the Fed and, even if the central bank hiked rates again in May, it was still expected to be ‘cutting again later this year as the economy falls into recession’.
