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Non-farm payrolls preview – job growth to remain strong


ArvinIG

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US jobs growth in March is expected to remain solid, although below the level of February, which will encourage the Fed to stick with its plans to tighten monetary policy.

US Capitol
Source: Bloomberg
 
 

US jobs growth to slow

This month we are expecting to see non-farm payrolls (NFP) rise by 485,000, a strong number, but down on last month’s 678,000. The unemployment rate is expected to fall to 3.7% from 38%, while average hourly earnings are forecast to grow by 0.4%, compared to last month’s flat figure.

Economic growth in question as inflation rises

The current pace of job growth, and indeed of job increases, may well come under pressure as the Federal Reserve (Fed) continues to push forward with interest rate increases.

Indeed, the Federal Open Market Committee (FOMC) may well accelerate the pace of its tightening as the year goes on, with a 50 basis points (bp) increase in rates now a distinct possibility at the meeting in May.

It would take a very sharp downturn in jobs growth for the Fed to reconsider their views, and even then they may have no option but to push forward, given the strong readings in inflation data that currently prevail. For the moment, strong NFP readings such as those we have seen in recent months and are expected for March are likely to reconfirm the Fed in their view that the economy can maintain interest rate increases.

US dollar index outlook

The steady gains in the dollar index over the past year have stalled this month, with the price holding below 99.50. Dips towards 97.60 have found buyers in the short term, which leaves the uptrend broadly intact.

A move below 97 would put the price below the January and February highs, and signal that the retracement has further to run, potentially bringing the 95.85 area into view.

USD Index chart
Source: ProRealTime

Chris Beauchamp | Chief Market Analyst, London
31 March 2022

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