Jobless Data Makes March Rate Hike More Likely

key takeaways

Unemployment numbers continue to improve, suggesting that a March rate hike is looking more likely
Bitcoin and other risk assets largely have hikes priced in already, analysts say

US jobless claims rose last week after three straight weeks of declines. Unemployment still remains at a historic low, however, a key metric that may mean hawkish action from the Federal Reserve is to come.

Initial jobless claims rose to a seasonally adjusted 248,000 last week, up from 225,000 the prior week, according to data from the Department of Labor. Continuing claims, which provide insight into the number of citizens receiving state unemployment benefits, declined to 1.59 million, down from 1.62 million the week prior.

The largely positive report comes after Federal Reserve Chair Jerome Powell indicated that maximum employment is a key goal that must be met before the Fed will raise interest rates or taper asset purchases.

“In their discussion of current economic conditions, participants noted that indicators of economic activity and employment had continued to strengthen,” minutes from the Fed’s January meeting read.

While the employment situation may be looking up, inflation continues to rise at the fastest rate in 40 years, leading analysts to believe rate hikes are coming in March.

“The central bank will kick off its tightening cycle next month and a number of consecutive hikes will likely follow,” Craig Erlam, senior market analyst at OANDA, wrote in a note Thursday.

“Whether they’ll kick things off with a 50 basis point hike isn’t yet clear and will depend on the data in the coming weeks, but there doesn’t appear to be consensus for it yet, despite markets pricing in a fair chance of it happening.”

Fed fund futures show a 69.2% probability that the Fed will raise rates between 25 to 50 basis points at its March 15-16 meeting, which is 19 trading days away.

The prospect of higher rates has put a damper on risk assets, including bitcoin and other cryptocurrencies, in recent months. Bitcoin fell about 2% Thursday an hour after the release of the jobs report, but analysts remain optimistic.

“[Bitcoin] has shown real resilience in recent weeks, but is struggling to generate the momentum needed to take the next step,” Erlam said. “The uncertainty in the markets probably isn’t helping, although it hasn’t held it back recently, a break above here could be a very bullish development for bitcoin.”

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.