Job growth remained very hot in March, as employers added 236,000 payroll jobs, but slower wage growth kept hope alive that the Federal Reserve had raised interest rates one last time. However, the unemployment rate unexpectedly fell, complicating expectations. S&P 500 futures rose in stock market action shortened Good Friday after the jobs report.
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Jobs report hits and misses
Employment gains came close to Wall Street expectations of 240K. But the private sector added only 189,000 jobs, which fell short of the estimate of 223,000 jobs. This was the weakest private sector hire in more than two years. Meanwhile, government employment rose by 47,000.
Average hourly earnings increased 0.3% in the month, as expected. Annual wage growth of 4.2% is lower than the forecast of 4.3%.
The unemployment rate fell to 3.5% against expectations of 3.6%. The labor force participation rate increased to 62.6%.
Strong employment gains in January and February were revised downward by 17,000 jobs combined.
Key job and wage numbers come from the Department of Labor’s monthly survey of employers. A separate household survey details labor force participation, employment status, and unemployment rate.
The household survey data showed an increase in the number of workers by 577 thousand, and the number of unemployed decreased by 97 thousand, as 480 thousand joined the labor force. The labor force participation rate, which includes those who are working or actively looking for work, was as high as 62.6%.
Soft wage growth trend
Increase average hourly wages for three months to 0.8%, or 3.2%, at the annual rate. This is less than the 3.5% wage growth that Federal Reserve Chairman Jerome Powell said is consistent with the 2% inflation target set by the Fed.
The Fed is putting more emphasis on the labor cost index measure of wage growth. The ECI report for the first quarter comes out on April 28 and could influence the Fed’s decision to raise rates or not.
Standard & Poor’s 500 reaction
S&P 500 futures rose 0.2% after the jobs report.
US stock markets are closed on Good Friday.
On Thursday, the S&P 500 rose 0.4%, maintaining its bullish trend intact. During Thursday’s close, the S&P 500 rose 14.8% from the bear market’s closing low of Oct. 12, but remained 14.4% below its all-time close high of Jan. 3, 2024.
S&P 500 stock valuations have been buoyed by a dive into Treasury yields as the bond market reflects an increased likelihood of a recession. However, this would hurt the earnings outlook, so it’s unclear how long the current strength will last.
Make sure to read The Big Picture of IBD each day to stay in sync with the market trend and what that means for your trading decisions.
More job report details
Employment in the leisure and hospitality sector increased by 72,000. Health care and social assistance jobs increased by 50,800 jobs.
Vulnerabilities included retail (-14,600), casual workers (-10,700), construction (-9,000), and manufacturing (-1,000).
The average workweek fell to 34.4 hours from 34.5 hours, meaning employers didn’t have to ride their workers as hard to keep up with demand.
Because of the shorter workweek, weekly earnings growth for average workers slowed to 3.3% from a year ago, the lowest level in three years.
Federal jobs policy impact report
Federal Reserve Chairman Jerome Powell acknowledged in his March 22 press conference that the sudden onset of a banking crisis last month had clearly tilted economic risks to the downside. Tightening bank credit to individuals and businesses means that the Fed will not have to tighten policy as much as previously thought in order to rein in inflation.
The banking crisis erupted too late to have any impact on the March jobs report, which is based on employer and household surveys in the middle of the month. However, some business surveys extending through the end of March are starting to show a gradual softness.
After Friday’s jobs report, Markets are priced at higher odds The Fed will raise its key interest rate one last time on May 3. However, more timely and forward-looking economic data suggests that the Fed may have already done enough.
Revised data from the Labor Department, after correcting for seasonally adjusted methodology, shows that claims for unemployment benefits were much higher than achieved. A total of 228,000 people filed for unemployment benefits in the week ending April 1, well above the consensus of 201,000. Claims for the previous week were revised up by 48,000 to 246,000.
The four-week average of jobless claims decreased -4,250 to 237,750. However, this is still up about 25% since the beginning of October.
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