March’s robust job gains may push the Federal Reserve into a more cautious stance regarding potential rate cuts, with conflicting signs emerging about the labor market’s strength. After the Labor Department’s nonfarm payrolls report Friday showed a robust gain of 303,000, futures market pricing indicated barely more than 50% of a chance that the Fed will start cutting in June. A strong jobs outlook raises the potential of greater inflation pressures, meaning the central bank might be less eager to ease policy. In recent days, the potential of a tighter Fed has been poison for stocks, though they staged a solid relief rally Friday despite the strong payrolls data. “Another massive jobs number is making Fed rate cut forecasters hot under the collar,” said Seema Shah, chief global strategist at Principal Asset Management. Looking at the bright side, though, Shah added that “[Friday’s] report should reassure markets that, if the Fed does not cut in June, it’s because the economy is still strong and earnings should remain in an upswing.” Signs of weakness The jobs numbers indicate a tight labor market and an economy remaining strong despite the Fed holding its benchmark short-term borrowing rate at its highest level in 23 years. Some investors and economists, though, still worry that the Fed might be restrictive for too long. Mohamed El-Erian, the chief economic advisor at Allianz, charged Friday that the Fed has become too reliant on rolling data points and instead should focus on longer-term strategy. “The mistake that they may make is they’ll end up this time being too tight,” he told CNBC during a financial conference in Italy. Indeed, there are some signs that the labor market’s strength may not be as robust as the headline nonfarm payrolls numbers indicate. For one, while the payrolls numbers reflect the total jobs gained through the wide-ranging survey of establishments, the narrower household survey has consistently shown fewer people actually working. Though…
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