The poor numbers make it exceeding unlikely that the Fed will raise interest rates at its June meeting, which at one point had been a foregone conclusion for many analysts.
Hiring slowed down big time in the month of March, ending what had been a nice, long stretch of strong job creation — raising questions about what the future holds for the U.S. economy.
Investors and policymakers were waiting on pins and needles for Friday’s report from the Labor Department, and, unfortunately, the news wasn’t good, according to a Wall Street Journal report.
The economy grew again as expected, but the rate at which it did was much lower than in the past. With consumer spending, capital investment, and manufacturing output all slumping and a strong U.S. dollar dragging down exports, investors had hoped for strong labor numbers, but instead nonfarm payrolls increased by just 126,000, which was the weakest rate in 15 months. Unemployment, meanwhile, remained at 5.5 percent.
Job growth had averaged 197,000 per month in the first quarter, which was already down from an average of 324,000 in the last three months of 2014. This indicates that the economic recovery is not as strong as had been thought, and that the labor market is only just now catching up to other indicators that had been lagging, according to Megan Greene, chief economist at John Hancock Asset Management, as reported by WSJ.
The new data could have a big impact on the Federal Reserve’s plans to raise the interest rate. When the economy was at its strongest last year, analysts believed that the rate hike was likely to come this summer in order to stem the tide of inflation that would necessarily come with strong economic growth. However, with the economy slowing down, the Fed may decide to keep the rates low for longer in order to spur growth.
Friday’s report reduces the likelihood that the Fed will boost the interest rate at its June policy meeting as had once been assumed. However, two more jobs reports are due in the next few months, and if they show dramatic growth, that could change.
Low oil prices are continuing to drag down the world economy, and the U.S. is no exception. The boost for consumers in cheap gasoline has been offset by widespread problems in the oil industry due to the prices.
