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Published : 09 Mar 2025, 08:43 AM
The Federal Reserve will head into its March 18-19 policy meeting with the labour market strong overall but showing some potential early signs of weakening, a development that could put the US central bank in a tough spot if inflation remains high and the Trump administration's tariffs add to price pressures.
US job growth picked up in February, the Labor Department reported on Friday, with employers adding 151,000 jobs. That's well above the monthly growth rate of 80,000 to 100,000 that Fed Governor Christopher Waller on Thursday said he would view as being a healthy level of job creation.
Waller and other Fed officials have said a strong labour market for now allows the central bank to keep its benchmark overnight interest rate in the 4.25%-4.50% range as it waits for more progress on inflation, which remains above the 2% goal.
But the latest jobs report also showed the unemployment rate ticked up to 4.1% and the number of people settling for part-time work because they couldn't find a full-time position also rose sharply, pushing up a broader measure of unemployment known as the U-6 to 8%, the highest level for this measure of underemployment since October 2021.
The federal government shed jobs last month, the report also showed, though analysts said the full effect of workforce reductions spearheaded by tech billionaire Elon Musk and his Department of Government Efficiency may not show up until March or April.
"The February employment report showed some softening in conditions even before the impact of the larger cuts to federal hiring and contractors takes effect," Julia Coronado, the president of MacroPolicy Perspectives, wrote in a note. "We continue to expect reduced immigration, federal job losses, and the chilling effect of uncertainty from DOGE payment defaults and tariff policy to substantially slow hiring in the months ahead, so the Fed is likely to face threats to both sides of its dual mandate."
US stocks ended higher on Friday, rebounding from early declines to give the Dow and S&P 500 a half-percentage point gain each, while the Nasdaq climbed seven-tenths of a percent.
Traders of short-term interest rate futures after the report pushed their bets on a start to Fed rate cuts to June, from a view of May before the report, but still see a total of three cuts in 2025.
Fed policymakers, who in December felt there would likely be two rate cuts this year, will be updating their rate-path projections at the upcoming policy meeting.
US President Donald Trump's on-again, off-again tariff policies have whipsawed investors and prompted some businesses to put investments on hold. Several Fed policymakers have said they want more clarity on the tariffs and other policies before they move rates again.
Fed Chair Jerome Powell will give his latest read on the economic outlook and monetary policy later on Friday.
