So where will the American economy end? The resilience of the world's largest economy, especially in a context of restrictive interest rates, indeed commands admiration. And it’s not our good old Europe that will say the opposite. The publication of the American employment report for the month of March, published last Friday, once again surprised the financial markets by coming out well above expectations. We would almost come to question the relevance of the economic forecasts: expected at 214k, job creation finally appears at 303k, or 40% above estimates. It’s quite simple, of the 74 economists on the panel, not one had predicted such a high figure. We therefore better understand the notion of “data-dependence” of central banks…
In detail, job creation therefore remains extremely solid with a rate significantly higher than the average of the last 3 and 12 months. This is all the more significant as previous months were also revised upwards. Creations remain concentrated in a limited number of sectors (health, leisure and hospitality and public services, the latter sector still being in the post-covid catch-up phase and benefiting from the increase in federal spending). Even the household survey, which in recent months provided a more measured view of the labor market, has rebounded strongly. While these creations would essentially be due to part-time jobs, they would ultimately be concentrated among young workers and people over 55. In this context, the unemployment rate fell by 0.1% in March to stand at 3.8% while the participation rate was increasing. Not much negative to report on the job market in March. Even if wage growth continues to normalize (see chart of the week) and is likely to continue (increase in legal immigration, drop in labor turnover, etc.), this report on employment has given food for thought to the most hawkish members of the FOMC who see it as an opportunity to maintain a restrictive monetary policy for longer. The mention by Neel Kashkari, the president of the Minneapolis Fed, of “forgoing any rate cuts this year” if necessary was naturally not well received by the market. The inflation data which will be published on Wednesday will therefore be crucial in trying to see more clearly the timetable for lowering the Fed's key rates.
And the ECB in all this? In view of the latest figures, inflation seems to be less and less of a problem in the euro zone. The March publication thus reports a further fall, below expectations, in overall and underlying inflation. Inflation in services, which remains at around 4%, may allow the ECB to delay a little longer (this will surely be highlighted during this week's monetary policy meeting). But for how long ? Christine Lagarde will soon no longer have the luxury of letting Jerome Powell get the ball rolling.