Canadian Imperial Bank of Commerce: Non-farm payrolls in March are expected to confirm the Fed’s rate hike by 25 basis points

On April 7th, the Canadian Imperial Bank of Commerce believes that the number of people applying for unemployment benefits in the United States in March remained low, indicating that non-agricultural employment in March is expected to increase by 220,000. While our forecast for average hourly earnings growth of 0.3% does not rule out the possibility of achieving targeted inflation, the pace of job creation of 220,000 is roughly double the employment that Powell believes is needed to achieve the inflation target. As such, we continue to expect the Fed to deliver a final rate hike of 25bps, provided banking problems do not spread. With private sector job creation slowing and previously announced layoffs continuing, we expect the pace of hiring to cool further ahead, which, combined with a deterioration in cyclical sectors, could put the Fed on hold after the May FOMC meeting hike. Our forecast is slightly lower than the market consensus, and the slightly lower non-farm payrolls may not be enough to put downward pressure on US bond yields, as the fading of banking concerns is a more important factor