*** Bloomberg Article ***
Top Financial News
Sun, 28 Mar 1999, 1:01pm EST
Federal Reserve Likely to Leave Rates Unchanged as U.S. Job Growth Slows
Fed Likely to Hold Steady as Job Growth Slows: Economy Preview
Washington, March 28 (Bloomberg) -- U.S. job growth probably
slowed in March, keeping wage pressures from driving up inflation
and giving Federal Reserve policy-makers another reason to leave
interest rates unchanged when they meet this week.
The number of non-farm jobs probably rose by 155,000 in
March, according to analysts surveyed by Bloomberg News. That
would mark the lowest monthly jobs increase since July 1998, when
the U.S. economy added 118,00 non-farm jobs. The government will
issue its March employment report Friday.
The report probably will also show that the unemployment
rate held steady at 4.4 percent, just a tenth of a point higher
than January's 4.3 percent.
A slowdown in job growth would give Federal Reserve policy-
makers more evidence inflation isn't a threat, buttressing what
most analysts see as the Federal Open Market Committee's bias
against changing interest rates. The central bankers, who meet
Tuesday to deliberate on U.S. monetary policy, will leave
interest rates unchanged, the top 30 Wall Street bond firms said.
''I guess the one thing that could set the market back is if
the Fed announces a tightening bias on Tuesday,'' meaning they
would lean toward raising interest rates, said Jerry Zukowski, an
economist with PaineWebber Inc. in New York. Most traders and
analysts, though, expect central bankers won't change policy.
A Bloomberg News survey of the primary dealers -- the firms
that deal directly with the Fed's securities trading desk --
shows that all are convinced Fed policy-makers will leave the
target for overnight loans between banks at 4.75 percent. Most of
the respondents said the Fed will leave rates unchanged this
year.
Inclement Weather
Bad weather probably helped hold job growth down in March,
analysts said. ''There was a bad storm during the survey week,''
hurting construction and other seasonal industries, said Carol
Stone, deputy chief economist at Nomura Securities. A late-winter
storm earlier this month dumped as much as two feet of snow
across the U.S. East Coast and Midwest, cutting power to more
than 130,000 people and forcing schools to close and airlines to
cancel flights.
Still, it may take a while before employers begin to add
jobs again at the pace of the last few months.
''We got a boost from good weather in winter months,'' Stone
said. ''Now that it isn't so good, it takes some of that boost
away.''
In February, construction spending probably rose at a slower
pace than the previous month. The Commerce Department's report on construction spending, to be released Thursday, will probably
show that it rose at a 0.3 percent rate in February, slower than
January's 1.6 percent pace, according to economists surveyed by
Bloomberg News. ''That doesn't mean we're headed down,'' said Stone. ''It just means we've seen great strength, and we're looking for some consolidation.''
February new home sales, set for release Monday, probably
rose 0.7 percent to an annual rate of 925,000 after declining 5.0
percent to 918,000 in January, analysts said.
Other Reports
Other reports are likely to show the U.S. economy continuing
to grow at a breakneck pace. The Commerce Department's final
estimate of the gross domestic product for the last quarter, set
for release Wednesday, will probably show an annual growth rate
of 6.1 percent, in line with last month's estimate.
Economists surveyed expect personal income rose 0.5 percent
in February while spending rose 0.7 percent. The Commerce
Department's monthly income and spending report will be released
Thursday. The New York-based Conference Board's survey of
consumer confidence in March, to be released Tuesday, probably
remained strong, declining only half a point to 131.6.
''The domestic economy has been very strong, and these
reports are going to give more evidence of that,'' Stone said.
Still, U.S. factories, which suffered a slowdown last year,
may not be out of the woods yet, analysts said. The National
Association of Purchasing Management's index of manufacturing
activity, due for release Thursday, probably stayed above 50,
though declining to 51.7 in March from 52.4 the previous month.
Commerce Department statistics due out Wednesday, though, will
probably show that orders placed with U.S. manufacturers in
February fell 2.1 percent after rising 1.7 percent in January.
Next Week
Date Time Period Indicator BN Survey Prior
3/29 10:00 February Home Sales, New 925K 918K
3/30 10:00 March Confidence-Conf. Board 131.6 132.1
3/31 8:30 4Q f Gross Domestic Product 6.1% 6.1%
3/31 8:30 4Q f GDP Price Deflator 0.7% 0.7%
3/31 10:00 March Chicago Purchasers 52.3 52.9
3/31 10:00 February Factory Orders -2.1% 1.7%
4/1 8:30 3/27 Initial Jobless Claims 291K 289K
4/1 8:30 February Personal Income 0.5% 0.6%
4/1 8:30 February Personal Spending 0.7% 0.3%
4/1 10:00 February Construction Spending 0.3% 1.6%
4/1 10:00 March NAPM 51.7 52.4
4/2 8:30 March Unemployment Rate 4.4% 4.4%
4/2 8:30 March Avg. Hourly Earnings 0.3% 0.1%
4/2 8:30 March Change Nonfarm Jobs 155K 275K
4/2 10:00 February Housing Completions n/a 1.661M
Federal Reserve, Treasury Events
On Tuesday, the Federal Open Market Committee meets to
decide whether to change U.S. interest rates. Also Tuesday, U.S.
Treasury Secretary Robert Rubin speaks about the global economy
at North Carolina State University's Emerging Issues Forum.
U.S. Treasurer Mary Ellen Withrow speaks to the Orlando Area
Savings Bonds Kick-Off Luncheon in Orlando, Florida, on Tuesday.
On Wednesday, she speaks to the Greater Miami-Dade Area Savings
Bond Kick-Off Luncheon at Miami Lakes Technical Education Center
in Miami.
Also Wednesday, the Federal Reserve releases the minutes
from the Fed policy-makers' Feb. 3 meeting. |
