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Weak employment data in the US reinforces the continuity of the Fed’s monetary policy

Por Howard Schneider

WASHINGTON, May 7 (Reuters) – The 266,000 jobs US companies added in April give officials at the Federal Reserve little reason to do anything other than keep the expansionary monetary policy tap wide open until it’s done. clear that the economy is on the way to return to full employment.

The unemployment rate in the United States rose to 6.1% and is still well above the 3.5% it reached in the months before the pandemic, according to the report released Friday.

Only 57.9% of the population was working, according to the report, well below the 61.1% of February 2020. And the US economy is still missing more than 8 million jobs compared to its level before the crisis.

A Reuters poll of economists had predicted that the US economy would add 978,000 jobs in April.

“This puts less pressure on the Fed to talk prematurely about tightening its monetary policy. (Those responsible) wanted to be patient and delay it,” said Larry Adam, chief investment officer at Raymond James in Baltimore, Maryland.

The numbers are sure to disappoint Atlanta Federal Reserve Chairman Raphael Bostic, who on Thursday said he expected “a really strong number” of more than 1 million new jobs. Even that would not have changed his view of the Fed’s monetary policy trajectory.

In December, the Federal Reserve said it would not consider changing its monetary policy, and in particular its $ 120 billion in monthly bond purchases, until there was “substantial additional progress” in meeting its full targets. employment and inflation of 2%.

Since then, the prices of some goods have risen, but those in charge of the Fed consider that the increase is probably temporary and their hope is to raise inflation to 2%, something that will only become evident with time.

Policy makers have made it clear that they will not be satisfied until the combination of job gains and the evidence of further growth put the economy on the path of “maximum employment.”

Following Friday’s report, interest rate futures traders lowered their bets that the Fed will start raising rates next year, and the 10-year US Treasury yield fell to a two-month low.

The bulk of central bankers in the United States see the possibility of waiting until 2024 before raising rates for the first time since the Fed’s official interest rate was cut to almost zero last March.

(Information from Howard Schneider; additional information from Sinead Carew from New York; edited by Andrea Ricci; translated by Darío Fernández at the Gdansk newsroom)

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