A cut in United States interest rates before the summer looked less likely on Friday after a sharp increase in the number of jobs created last month.
Employment figures for March showed the US economy added 180 000 jobs, compared with forecasts of a 130 000 increase. The Labour Department also revised job numbers for January and February upwards, by 16 000 in each month. On top of that, the unemployment rate last month unexpectedly slipped from 4,5% to 4,4%, the lowest level since October.
The closely watched non-farm payrolls report suggests the US economy may not be slowing down as rapidly as had been feared, despite concerns about the knock-on effect of a weak housing market.
The news sent the dollar higher and US Treasury bonds lower, as economists predicted the Federal Reserve would be concerned about inflationary pressures and would be unlikely to rush to cut interest rates from the current 5,25%.
Stuart Hoffman, of PNC Financial Services in Pittsburgh, told Reuters: “This report is consistent with the idea that the US job market remains solid and that economic growth by no means is going to drift down to recessionary levels.”
Paul Ashworth, senior US economist at Capital Economics, said: “The bottom line is that the Fed won’t be cutting rates while the economy is creating well over 100 000 new jobs a month, particularly not while inflation remains uncomfortably high.
“We still anticipate that the labour market will weaken over the next few months, as we start to see more substantial lay-offs in housing-related sectors. But there is little sign of that happening just yet. It is now likely that the Fed won’t start cutting rates until its meeting in August, rather than in late June … Nonetheless, we still expect rates to end the year at 4,5%.”
A turnaround in the construction industry partly accounted for March’s increase in jobs. There were 56 000 construction jobs added last month, after 61 000 were lost in February, some due to cold weather. In addition, there were twice as many retail jobs added in March — 35 900 versus 17 400 in February. — Guardian Unlimited Â