Finally, the latest NFP report tells us that around 236K jobs were added to the US economy in March. This NFP reading only missed the expectations slightly and was mostly taken as a positive sign for the jobs market.
After the report, the S&P 500 Futures index was trading a little lower during the pre-open session. This is mainly due to the fear of yet another rate hike from the Fed, especially after the confirmation of a strong jobs market.
The unemployment rate in the USA reached 3.5% during March, which was well below the expectations of 3.6%. Similarly, the average hourly earnings in the USA jumped by 0.3% MoM and around 4.2% YoY. This is the lowest level when we look at the data from the last 21 months.
After the jobs report for the month of March, there will be no new reports until the next Fed meeting scheduled in May. This means the Fed will be making its decision on a rate hike or a rate cut based on March's NFP report.
That's why almost 60% of the market players are now expecting a 25 bps rate hike in the May meeting.
According to the economists of Bank of America (BoA), the recent jobs report suggests that the US labor market is 'hot to red-hot'. Based on this view, the economists of Bank of America believe the next rate hike from the Fed will be 25 bps.
They also added that the Fed would most likely put a hold on the rate hikes after the May meeting. If this turns out to be true, then the terminal rate set by the Fed will be around 5% to 5.25%. Similarly, the economists at Morgan Stanley are also pricing in a rate hike of 25 bps by the Fed.
Overall, most economists and experts are now looking for a 25 bps rate hike, and there are very few who are advocating for a rate cut or no change in the interest rate.