The release last Friday of February’s better than expected employment figures was darkened by news of financial turbulence emanating from some regional banks.
Another month of vigorous job creation is evidence that the US economy remains strong, despite the monetary policy tightening that the central bank has imposed to bring inflation under control. The creation of 311,000 new jobs in February, after a revised figure of more than 500,000 in January, marked 26 consecutive months of job creation. The unemployment rate increased slightly, from 3.4 percent in January to 3.6 percent in February, but for good reason. The labor force participation rate increased to 62.5 percent from 62.4 percent, indicating more workers were employed, or were looking for work. Additionally, in February wages increased 0.2 percent, still under the rate of inflation.
However, by the end of last week, two banks in California and another one in New York were in distress. The intervention of those regional banks by the authorities, to eliminate panic and any risk of contagion, led to assure all depositors they would have access to their money. Additionally, the Federal Reserve announced an emergency lending program to provide liquidity to vulnerable banks. All these events, together with the persistence of inflation, have increased the expectations about the posture the central bank will adopt at its next week meeting.
