US Jobs Report and Powell Testimony Take Center Stage

US job growth probably moderated last month after a blistering January pace, while the unemployment rate likely held at a 53-year low, illustrating a labor market that’s proved mostly impervious to the Federal Reserve’s massive interest-rate hikes.

The report will follow testimony by Fed Chair Jerome Powell on Tuesday and Wednesday as he delivers semi-annual monetary policy report to lawmakers. His comments may shed light on whether investors are in tune with the central bank’s view on how high it will have to raise rates to knock down inflation.

Payrolls increased by 215,000 in February, according to the median forecast in a Bloomberg survey. To start the year, US employers added more than half a million workers and the jobless rate fell to 3.4% — results that dashed expectations for a near-term pause in the Fed’s tightening campaign.

Friday’s jobs report will be the last before the Fed convenes March 21-22 to consider another 25 basis-point increase in rates or to potentially be more heavy-handed in light of recent data showing stubborn inflation. Officials will also have February consumer-price index and retail-sales data in hand before they meet.

What Bloomberg Economics Says:

“But our analysis suggests many of the high-profile layoffs that have been announced – in tech, for example – only translate to job losses about two months later. If that’s correct, we should expect to see initial jobless claims climb in March.

The March jobs reports – which won’t come out until after the next FOMC meeting – will likely show clearer signs that the labor market is weakening. Unfortunately, the Fed can’t wait until the fog clears to make policy decisions.”

—Anna Wong, Stuart Paul and Eliza Winger, economists. For full analysis, click here

“If the data show that the re-acceleration at the start of the year was short-lived, the Fed’s narrative would become much easier,” Bank of America Corp. economists, led by Michael Gapen, said in a report. “A little bad news would be good news for the Fed.”

Resilient labor demand has bolstered wage growth, in turn undergirding consumer spending and adding to employers’ costs. That risks keeping inflation higher for longer, and helps explain why swaps markets are now pricing in a peak policy rate of 5.5% in September. The benchmark rate currently stands in a range of 4.5% to 4.75%.