US SHEDS THOUSANDS OF JOBS AS UNEMPLOYMENT EDGES HIGHER

American employers unexpectedly reduced jobs in February, leading to a rise in the unemployment rate amid a strike by healthcare workers and severe winter weather. Non-farm payrolls decreased by 92,000 jobs following a downward revision from January’s reported increase of 126,000 jobs, as stated by the Labour Department’s Bureau of Labour Statistics.

Economists had forecast an increase of 59,000 jobs, expecting a more positive outcome than what transpired. The unemployment rate increased from 4.3 per cent in January to 4.4 per cent, with the number of unemployed individuals rising from 7.4 million to 7.6 million. A strike involving over 30,000 Kaiser Permanente employees in California and Hawaii negatively impacted payroll figures.

The healthcare and social assistance sectors, which accounted for much of the job growth last year, experienced a loss of nearly 19,000 jobs. Job weakness was not confined to one sector; construction employment fell by 11,000, manufacturing dropped by 12,000, transportation lost 11,000 jobs, and leisure and hospitality saw a reduction of 27,000 jobs. Additionally, government employment decreased by 6,000 positions.

These figures have raised fresh concerns about the American labour market, which had previously shown signs of stabilisation. Jerome Powell, Chairman of the Federal Reserve, described the environment as one of low-firing and low-hiring. Analysts observed a hesitance among businesses to expand their workforce, indicating a trend of ‘no hire, no fire’ where feasible, helping to keep the unemployment rate relatively steady.

Even after accounting for the impact of the healthcare worker strike, the jobs data suggests that the labour market remains fragile. Economists have reduced their expectations regarding a Federal Reserve interest rate cut, particularly as geopolitical tensions threaten to exacerbate inflationary pressures. Retail petrol prices have risen sharply since military actions began in the Middle East, impacting consumer sentiment.

With inflation witnessing an uptick at the start of the year, surging oil prices, and an increasing unemployment rate, expectations of an imminent interest rate reduction appear unlikely. The Federal Reserve is set to convene for its next policy discussion on March 17 and 18, where it is anticipated to maintain its benchmark overnight interest rate in the 3.5 per cent to 3.75 per cent range.

The complexity of the Federal Reserve’s dual mandate is coming to light, as the pressures of rising inflation conflict with the deteriorating state of the jobs market.