Forex Flash: US firms still reluctant to take on workers - RBC

FXstreet.com (Barcelona) - Paul Ferley, Assistant Chief Economist at RBC Economics notes that some slowing in US employment growth was expected in March following what appeared to be outsized increases in recent months.

In fact, he adds that these earlier increases were revised higher in both January and February and on net, however, today’s report implies greater than expected caution on the part of firms to take on new workers. He believes that an obvious factor was the March 1 implementation of the federal government sequestration. Although recent expenditure data are pointing to first-quarter 2013 GDP growth likely rebounding to over 3% relative to the negligible 0.4% gain in the fourth quarter of last year, his forecast assumes that the forced expenditure reductions will likely lower that growth rate to under 2% in the second quarter of 2012. He writes, “Anticipating this slowing, business likely became cautious about taking on new workers. Our forecast assumes that the effect from sequestration will ease during the second half of 2012. The Fed will likely keep policy highly accommodative to help bolster the prospects of the fiscal restraint having a short-lived effect.”