Wall Street Journal: Recent employment data suggests interest rate cuts will be delayed

The Wall Street Journal noted that the hiring sector is booming, defying expectations the economy would cool after witnessed a significant positive movement last year.In its report, the US Labor Department noted on Friday that employers added 353,000 jobs last month, which was the strongest in a year and nearly double what economists surveyed by The Wall Street Journal expected.Jobs data has for months pointed to a gradual slowdown in the labor market across the United States, which along with falling inflation has helped boost bets that the Federal Reserve will start cutting interest rates as early as 2024.The report will likely keep the US Federal Reserve on track to hold rates steady at its next meeting, March 19-20, as officials wait for more evidence that a recent trend of lower inflation continues."The S&P 500 climbed 1.1% to close at a new record, indicating that after months of falling inflation investors have become more confident that a strong labor market is sustainable rather than a problem that could cause prices to jump again," the newspaper said.It added that Decembers payroll gains were also revised upward, further undercutting the widely held view among economists and investors that it was becoming harder to find a job.The unemployment rate in January stayed at 3.7% instead of rising to 3.8% as economists had forecast. Wages outpaced expectations, jumping 4.5% last month from a year earlier.The head of U.S. rates strategy at TD Securities Gennadiy Goldberg said that, "the report was pretty universally positive...Weve seen strong gains on headline payrolls, strong revisions and the unemployment rate staying unchanged. It is showing that the labor market is doing better than previously expected."Federal Reserve Chair Jerome Powell told reporters last Wednesday, after the central bank left interest rates unchanged at their highest levels in two decades, that the labor market is still strong, and that they must be careful when they deal with the question of when to ease monetary tightening.Powell said most officials expect to cut rates this year if a string of lower inflation readings continues, but he suggested they werent likely to be confident enough about the sustainability of lower inflation by the time of their next meeting.Although the Labor Department Friday report was unexpected, investors have almost become used to such surprises after months of data showing inflation falling rapidly and economic growth remaining stable, if not accelerating, the newspaper explained, adding that "economists have no one explanation for how that has happened, but certain trends have gone as the Fed hoped. In particular, higher rates seemed to have cooled demand for workers without a big jump in layoffs. Job openings have declined and more workers are staying in their current jobs instead of quitting in the hopes of getting better pay."The newspaper said that this has helped bring down wage growth, which Fed officials see as critical to tempering overall inflation. Additionally, businesses have been able to increase the supply of goods to meet still-high consumer demand, aided by an influx of workers returning to their labor force.In turn, Bloomberg news said that recent high-level job cuts from companies may indicate that demand for workers will decline in the coming months. However, even as news of tens of thousands of layoffs grabs everyone's attention, the overall numbers remain weak in an economy with more than 150 million workers.Bloomberg said that the upward pressure on wage growth will continue, and it will be difficult for the Federal Reserve to reduce it early this year, noting that expectations for lowering interest rates have shifted to next May.