DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange were little changed early morning Friday ahead of the release of the U.S. non-farm employment report for the month of January that is expected to show job growth slowed further at the start of the year amid rising interest rates.

The U.S. labor market likely added 185,000 new positions last month, a somewhat slower pace compared to an average of 247,000 jobs created over the last three months of 2022. The unemployment rate, meanwhile, is expected to tick higher to 3.6%. Economists also estimate that average hourly earnings rose 0.3% month-on-month. While the expected jobs gain would be the smallest advance in just over two years, it highlights the resiliency of the U.S. labor market that so far showed little reaction to the Fed's aggressive rate hikes last year. The Federal Open Market Committee slowed the pace of interest-rate increases to 0.25% on Wednesday and indicated disinflation within some sectors of the economy might warrant a pause in the coming months.

"I continue to think that there's a path to getting inflation back down to 2% without a really significant economic decline or a significant increase in unemployment," Fed Chair Jerome Powell said at a press conference after the central bank raised its benchmark rate a quarter point. Inflation eased in recent months from an early summer peak of 9.1% annual rise to 6.5% currently, but much of that decrease came from the energy and goods sectors, leaving a large chunk of the service-oriented economy still mired in high prices.

"Disinflationary process is really in its early stage. You have a credible story in goods and housing. The issue is that we have a large core service sector where we don't have a disinflation yet," noted Fed Chairman Jerome Powell in a news conference Wednesday afternoon.

U.S. manufacturing is already in recession based on the latest monthly report from the Institute for Supply Management released Wednesday, with the headline index slipping to its lowest level since the first wave of the pandemic in March and April 2020 and before that the recession in June 2009. In contrast, services PMIs fell into contraction for the first time in 2 1/2 years last month, meaning the recession that is well under way in manufacturing has only begun to affect services.

Elsewhere, the European Central Bank (ECB), Bank of England (BoE) and Bank of Canada (BoC) all raised their lending rates this week to the highest level in nearly two decades but indicated it might be a time to assess the effect of cumulative tightening. The Bank of Canada became the first G10 central bank to signal a pause in monetary tightening amid signs of a sharp slowdown in economic activity.

"There is growing evidence that restrictive monetary policy is slowing activity, especially household spending," the BoC, led by Governor Tiff Macklem, said in a statement on Wednesday.

The BoE, led by Governor Andrew Bailey, announced Thursday a larger 50-basis-point increase in its lending rate but said further rises would only be needed if there were new signs that inflation is reaccelerating. Finally, the ECB confirmed expectations for a 50-basis-point increase on Thursday, adding, "There are signs that inflation is abating."

Eurozone inflation fell for the third straight month in January, flash figures published Wednesday showed, but headline inflation remained high at 8.5%. Core inflation, which excludes energy and food, was flat at 5.2%.

Near 7:45 a.m. EST, West Texas Intermediate futures for March delivery traded little changed near $75.94 barrel (bbl) and the international crude benchmark Brent was near $82.26 bbl. NYMEX RBOB March contract slipped to $2.4493 gallon and March ULSD futures dropped back $0.0013 to $2.8954 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com