The pandemic has distorted a previously strong labor market, leaving predominantly lower income workers, women, Hispanic and Black workers unemployed.
“The pick-up in employment growth isn’t as strong as we had been expecting, especially given the recent boost to demand from the fiscal stimulus, and could be a sign that the increasingly widespread reports of labor shortages are starting to constrain hiring,” said Andrew Hunter, senior US economist at Capital Economics.
This worker shortage could put pressure on wages to rise, which could be reflected in the April jobs report, economists said.
How the Fed could react
The other is to keep inflation steady. But the reopening of the economy, as well as higher raw material and energy costs are pushing prices higher. The Fed has said repeatedly it is too early to talk about raising its ultra-low interest rates or tapering its monthly, multi-billion dollar asset purchases.
The Fed is targeting inflation at around 2% but has said it is looking for a moderately higher rate over the medium term.
The central bank could signal an impending change at its June meeting, “with a formal tapering announcement at the September or November [Fed] meetings,” said Veronica Clark, an economist at Citi, in a recent note. This would be in line with the agency’s promise to alert the public well in advance of changing its policy.
