Data released on Friday showed the US economy added 236,000 jobs in March, the smallest gain in over two years. Analysts at Wells Fargo point out this is the type of employment report they believe the Federal Reserve wants to see: job growth slowing in an orderly fashion, labor supply expanding and wage growth that is edging closer to rates that are consistent with the central bank’s 2% inflation target. They expected another rate hike by 25 bps in May, probably the last one.
Job growth slows from hot to warm
“The employment report can be added to the growing list of indicators that suggest the labor market is softening directionally. While the level of many labor market gauges remain impressive, the weaker direction suggests the FOMC has the end of the tightening cycle within sight.”
“We continue to expect the FOMC will raise the fed funds rate by an additional 25 bps points on May 3 as the trend in inflation has not yet turned convincingly lower.”
“With the effects of policy tightening to date beginning to more clearly seep through to the jobs market, it may prove to be the final hike this cycle as the FOMC becomes more convinced the economy is softening sufficiently to keep inflation firmly on a downward path.”