Employers in the U.S. took on more workers in March than a month earlier and the jobless rate fell, indicating companies were confident sales will rebound from a weather-related setback, according to economists.
The Labor Department’s report caps a week of global economic data that include Japanese business sentiment and euro-area inflation.
Central bankers in Europe, Australia and Brazil also convene for policy decisions. The European Central Bank and the Reserve Bank of Australia are forecast to keep interest rates at record lows. Prospects for higher inflation in Brazil will probably prompt that country’s central bank to raise its benchmark rate to the highest level in more than two years.
-- Payrolls accelerated for a third month, rising by 200,000 workers in March as demand began to recover from a series of winter storms that slowed activity, according to the median projection in a Bloomberg survey of economists before the Labor Department’s April 4 figures. Employers added 175,000 workers a month earlier. The unemployment rate is forecast to decline to 6.6 percent from 6.7 percent, matching the lowest level since October 2008.
-- “Consumers are looking more confident about their employment prospects,” economists led by John Silvia at Wells Fargo Securities LLC wrote in a research note. He projects a 198,000 increase in March payrolls. “Meanwhile, initial jobless claims continue to show improvement. We should also see hours worked and other weather-susceptible components normalize in the month.”
-- “Less than 670,000 payroll jobs are needed to reach the pre-recession peak of nonfarm employment and complete the job recovery,” Scott Anderson, chief economist at Bank of the West in San Francisco, wrote in a note. Anderson forecasts March payrolls rose 195,000. “At the current pace of job growth, we should be at or above the previous peak in the next two to three months.” Still, the share of working-age population holding a job was 58.8 percent in February compared with 65 percent in 2000, he said. “This is another clear indication that labor markets are still fragile and have a long way to go to fully recover.”
-- Euro-area inflation probably slowed to 0.6 percent in the 12 months ended March, the slowest in four years, according to the median estimate in a Bloomberg survey of economists before the March 31 report. The gain would be less than half the pace that Mario Draghi and other policy makers at the European Central Bank define as price stability. Recent figures showed Spanish consumer prices unexpectedly declined in March, the first retreat since 2009. In Germany, the region’s largest economy, inflation cooled to 0.9 percent this month from 1 percent in February.
-- “Recent comments by several ECB members have turned more dovish,” Credit Suisse’s European economics team wrote in a March 27 note. “As such, risks are for the markets to be disappointed if they start factoring in hopes of more dovish ECB actions, against President Draghi sticking to the bank’s forward guidance script. Draghi is likely to stress the risks of inflation -- particularly stemming from the stronger currency.” In regards to the latest low-inflation readings, Draghi will “refocus the attention on inflation in the medium term,” Credit Suisse said.
-- The ECB on April 3 will keep its benchmark interest rate at a record-low 0.25 percent, according to economists surveyed by Bloomberg. Draghi committed on March 6 to keep borrowing costs low until after the recovery has become entrenched. Still, risks of deflation, or a sustained drop in prices, “are material,” according to economists at Barclays Plc.
-- “ECB inaction is difficult to rationalize,” Barclays economist Antonio Garcia Pascual wrote in a research note. “Even if we think the ECB should ease policy further, including launching a QE program to mitigate deflation risks, we believe that not having done so already means that the ECB is still reluctant to take further policy action in the near term. The reason is that economic activity is improving gradually and inflation may bounce up in April-May just above 1 percent.”
-- The Bank of Japan’s Tankan survey of large manufacturers will probably show a pickup in sentiment in the first quarter. The BOJ’s index is projected to climb to 19, the best reading since the final three months of 2007, from 16 at the end of last year, according to the Bloomberg survey median before the April 1 release. The central bank’s first-quarter survey will include company price forecasts, which are likely to become an important measure as the BOJ strives to hit its 2 percent inflation goal.
-- “On the request of the government, large companies decided to raise base wages at this spring’s annual wage negotiations,” Barclays economists Kyohei Morita and Yuichiro Nagai wrote in a note. “We believe the new Tankan survey component will become important in determining the extent to which companies plan to pass such wage hikes through to service prices. However, as there will be no time series for comparison at this stage, any direct impact on BOJ monetary policy will likely be limited”
-- “We envision results that enable the BOJ to sustain its existing monetary policy stance in the short term, including the policy meeting on 7 to 8 April, and sustain its approach of monitoring the impact of the consumption tax hike on the real economy and price trends over time,” Tokyo-based economists Junko Nishioka and Long Hanhua Wang from the Royal Bank of Scotland Group Plc. wrote in a note.
-- The Reserve Bank of Australia will probably keep the benchmark overnight cash-rate target at a record-low 2.5 percent on April 1 to nurture economic growth, according to all 33 economists surveyed by Bloomberg. Cheaper borrowing costs are paving the way for a pickup in domestic demand that will help provide a boost for the economy later this year, Reserve Bank Governor Glenn Stevens said in Hong Kong on March 26.
-- “We expect the RBA Board to leave the cash rate target at 2.5 percent for the seventh consecutive time,” Citigroup Inc. economists Paul Brennan and Joshua Williamson in Sydney wrote in a research report. “The rate guidance is likely to remain neutral, although the tone may be slightly more positive following the comments by the Governor in Hong Kong.”
BRAZIL RATE DECISION
-- Brazil’s central bank on April 2 probably will raise the benchmark Selic interest rate by a quarter point to 11 percent, the highest in more than two years after policy makers in a quarterly report forecast already above-target inflation will speed up for a second-straight year in 2014.
-- “Service inflation has gone up, and regulated prices aren’t going to help like they did last year,” said Carlos Kawall, chief economist at Banco J. Safra. “The central bank is being dragged into a higher tightening cycle. There is no other option, given that annual inflation continues to accelerate.”
-- “There are risks coming up, and the central bank can’t simply sit and wait,” said Jankiel Santos, chief economist at Banco Espirito Santo de Investimento. “Food inflation is the main factor.”
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