Employment growth in the US slowed in March, according to data from the Labor Department that shows firms brought on fewer workers than expected. Economic analysts believed the report would indicate to the Fed that hiring managers were beginning to retreat in the face of a significant economic slowdown. The report reveals that employers added 240,000 jobs last month, down from the 504,000 added in January and the 311,000 added in February. Despite this, the rate of hiring still places upward pressure on wages and prices, meaning future interest rate increases may be required.
The Federal Reserve has spent more than a year attempting to slow the pace of hiring to prevent sustained inflation. Despite a period of sustained interest rate hikes and a fall in borrowing, inflation remains above the Fed’s target of 2%. The organization is attempting to lead the country into a ‘soft landing,’ where the suppression of growth would be enough to reduce inflation without causing a recession.
Unfortunately, financial instability is now causing factors outside the Fed’s direct control to increase the likelihood of a recession. Two major US banks recently collapsed, while higher interest rates and tighter credit conditions will further destabilize banks, which could negatively impact consumer and business borrowing and spending, complicating the current economic environment.
Despite these new pressures, the job market remains robust. Even if growth slows, additional job openings are likely to become available. However, as more people begin to look for work, unemployment rates may rise. In its effort to manage the economic downturn, Fed officials hope fewer job openings will reduce wage pressure, encouraging more people to enter the job market and stabilize income levels. Taming inflation remains the chief priority, even though most economists do not believe a soft landing is achievable, and expect a recession later this year.
