US Payroll Report Offers Some Good News – But Just Some

The reaction from economists to the March payroll report is one of very cautious optimism, as the economy beat expectations through adding 215,000 jobs in March.

Unemployment actually rose from 4.9 percent to 5 percent over the months. However, economists stressed that this was good news because formerly discouraged workers are seeking jobs again. The job growth appears to be strongest in retail, construction, and health care, which continues patterns from the February jobs report.

But while the US economy appears to be improving to some degree, there are plenty of concerns. The global economy remains weak, as growth remains sluggish and the economies of the OECD nations is expected to grow just 3 percent in 2016. Despite bold measures like negative interest rates in Japan and Central Europe to stimulate the economy, businesses remain uninterested in spending and investing.

Furthermore, these jobs reports are now spurring speculation that the U.S. Federal Reserve may choose to raise interest rates at their next meeting in April. That has normally been the past approach in response to good economic news like these, as the Reserve starts to grow more concerned about inflation.

However, there are plenty of reasons to think that this will not happen at the meeting. For starters, Federal Reserve Chairwoman Janet Yellen has stressed that she does not believe that the Federal Reserve will have more than two interest rate hikes in 2016. While the Federal Reserve appears to be more concerned about the threat of inflation compared to Wall Street, Yellen understands that a premature rate hike could cause panicky investors to cut back on spending. Such an action could potentially trigger another recession.

And while good job numbers would normally create higher wages due to higher demands for labor, this has not been the case. Companies for now are content to expand payrolls, using sites like 1099 etc to calculate payments, as there are still plenty of individuals looking for work.

While future payroll reports hope to have similar job growth, it will likely be some time before it comes with an increase in wages and thus a potential rate hike.


Khuram Aziz
Khurram Aziz is a freelance writer based out of London, England.