Job growth remained pretty hot in March, as employers added 236,000 payroll positions, but slower wage growth kept alive hope that the Fed has hiked interest rates for the last time. However, the unemployment unexpectedly dipped, complicating the outlook. S&P 500 futures edged higher in abbreviated Good Friday stock market action after the jobs report.
Jobs Report Hits And Misses
Employment gains came close to Wall Street's 240,000 forecast. But the private-sector added just 189,000 positions, below estimates for 223,000. That was the weakest private-sector hiring in more than two years. Meanwhile, government employment rose by 47,000.
The average hourly wage rose 0.3% on the month, as expected. Annual wage growth of 4.2% undershot expectations of 4.3%.
The unemployment rate slipped to 3.5% vs. expectations of 3.6%. The labor force participation rate edged up to 62.6%.
Strong hiring gains in January and February were revised down by a combined 17,000 jobs.
The headline job and wage figures come from the Labor Department's monthly survey of employers. The separate household survey details labor force participation, work status and the unemployment rate.
Household survey data showed the ranks of the employed rising 577,000 and unemployed falling by 97,000 as 480,000 people joined the labor force. The labor force participation rate, which includes those working or actively seeking work, ticked up to 62.6%.
Soft Wage Growth Trend
The three-month increase in the average hourly wage rounds to 0.8%, or 3.2% at annual rate. That's below the 3.5% wage growth that Federal Reserve chair Jerome Powell has said is consistent with the Fed's 2% inflation target.
The Fed puts more emphasis on the Employment Cost Index measure of wage growth. The ECI report for Q1 comes out on April 28 and could influence the Fed's decision to hike or not.
S&P 500 Reaction
S&P 500 futures rose 0.2% following the jobs report.
U.S. stock markets are closed for Good Friday.
On Thursday, the S&P 500 rose 0.4%, keeping its uptrend intact. Through Thursday's close, the S&P 500 has rallied 14.8% from its Oct. 12 bear-market closing low but remains 14.4% below its all-time closing high on Jan. 3, 2022.
S&P 500 stock valuations have been supported by diving Treasury yields as the bond market reflects an increasingly likely brush with recession. Yet that would hurt the earnings outlook, so it's unclear how long current strength will last.
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More Jobs Report Details
Leisure and hospitality sector employment rose by 72,000. Health care and social assistance jobs grew by 50,800.
Weak spots included retail (-14,600), temp workers (-10,700), construction (-9,000) and manufacturing (-1,000).
The average workweek slipped to 34.4 hours from 34.5 hours, meaning employers didn't have to ride their workers quite as hard to keep up with demand.
Because of the shorter workweek, the growth in weekly earnings for average workers slowed to 3.3% from a year ago, the lowest in three years.
Fed Policy Impact Of Jobs Report
Fed chair Jerome Powell acknowledged in his March 22 news conference that the sudden emergence of a banking crisis last month has clearly tilted economic risks to the downside. Tighter bank credit for individuals and businesses means that the Fed won't 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 mid-month employer and household surveys. However, some business surveys that extended through the end of March have begun to flash incremental softness.
After Friday's jobs report, markets priced in higher odds that the Federal Reserve will raise its key rate one final time on May 3. Yet the most timely and forward looking economic data suggests that the Fed has probably done enough already.
Revised data from the Labor Department, after a correction to its seasonal-adjustment methodology, shows that claims for unemployment benefits have been running much higher than realized. A total of 228,000 people applied for unemployment benefits in the week through April 1, far above views for 201,000. Claims for the prior week were revised up by 48,000 to 246,000.
The four-week average of jobless claims dipped -4,250 to 237,750. Yet that's still up about 25% since the start of October.
