On Friday night we saw that US nonfarm payrolls had fallen by 92,000 last month, one of the largest declines since the pandemic, with job losses spread across a broad range of industries. The unemployment rate ticked up to 4.4%, raising fresh questions about the strength of the labour market.
The surprise slump challenges the prevailing view among policymakers that a stabilising jobs market would allow the Fed to hold rates steady while tackling inflation. With oil prices surging at the same time, traders are increasingly worried about stagflation risks, leaving the Fed in a difficult position, weaker employment would normally argue for rate cuts, but rising energy costs could force policymakers to remain on the sidelines.
