US Business Newsletter

March 01 - March 31, 2022

Greetings from Consulate General of India,

New York!

Welcome to the March 2022 edition of our newsletter, bringing you important policy and high-impact news.

We hope you find it useful.

US economy gained 431,000 jobs in March as the tight labour market persists

The US recorded strong job growth in March 2022 as higher wages lured more workers back to the labor force, giving the Federal Reserve another data point supporting more aggressive monetary policy to tame inflation. Employers in the world’s largest economy added 431,000 jobs last month, according to the Bureau of Labor Statistics, a cooler pace than the upwardly revised 750,000 positions created in February and less than Bloomberg’s consensus forecast of 490,000 jobs, but still a substantive increase in a tight labor market. For the first quarter of 2022, job growth averaged 562,000 per month, in line with 2021. The unemployment rate plummeted to 3.6 percent, a 0.2 percentage point drop from February and the lowest level since before the pandemic.

Another exceptionally strong US jobs report has kept the Federal Reserve on track to deliver a series of interest rate increases this year even as moderating wage growth mitigates the immediate need for aggressive tightening, according to economists. Hiring accelerated more than expected in February as the world’s largest economy added 678,000 jobs, the most since Jul 2021, pulling the unemployment rate down to 3.8 percent. A bigger surprise was the lack of wage growth. Average hourly earnings flatlined last month, following a 0.6 percent jump in January, but were up 5.1 percent over the past 12 months. And the job gains were widespread with strong increases in leisure and hospitality, healthcare, professional and business services, retail, and construction.

Inflation and Deficits Don’t Dim the Appeal of U.S. Bonds

Markets have been in upheaval. The Federal Reserve is taking steps to cool off the economy, as questions loom about the course of the recovery. And headlines are proclaiming that government bond yields are near two-year highs. But the striking thing about bonds isn’t that yields — which influence interest rates throughout the economy — have risen. It’s that they remain so low.

US PPI rose 10% annually in February to keep Fed on track for a rate rise

US producer prices rose more moderately in February despite maintaining a record annual pace, keeping the Federal Reserve on track to raise interest rates this week. The producer price index, which tracks the prices businesses receive for their goods and services, rose 10 percent last month compared with February last year, the Bureau of Labor Statistics said on Tuesday, 15 March 2022, the fastest year-on-year rate since the data were first collected in 2010 and in line with January’s increase. Producer prices gained 0.8 percent month-on-month, just shy of the 1 percent jump registered between December 2021 and January 2022.

US stocks rise and government bonds sell-off as traders anticipate rate rises

Wall Street stocks rose on Tuesday 22 March 2022, and US government bond prices fell, as investors looked ahead to tighter monetary policy from the Federal Reserve. The S&P 500 index rose 1.1 percent as investors balanced remarks from Fed chair Jay Powell about the need for rapid interest rate rises with his reassurance that tightening would not spark a recession. The tech-heavy Nasdaq Composite added 2 percent. Meanwhile, the yield on the benchmark 10-year US Treasury note rose 0.09 percentage points to 2.38 percent — the highest level since May 2019 — as its price fell. Powell said on Monday, 21 March 2022, that the Fed should move “expeditiously” towards tighter monetary policy. He also pushed back on concerns that this would cause a recession, citing episodes in 1965, 1984, and 1994 when the central bank slowed an overheated economy without prompting a sharp contraction.