U.S. job growth rebounded strongly in March, signaling a resilient labor market that could delay Federal Reserve rate cuts despite ongoing inflation concerns and a slight decline in labor force participation.
The U.S. labor market sprang back to life in March despite a war that raged on unabated in the Middle East and the resultant oil shock that is feared to accelerate inflationary pressure.
NFP Report: Major Takeaways:
- The U.S. economy added 178,000 jobs in March following the loss of 133,000 jobs in February, according to a Bureau of Labor Statistics report released Friday. Economists, on average, expected job gains of 65,000 for March versus the 92,000 job losses reported originally for the previous month.
- The private goods-producing sector added 43,000 jobs, and the private service-producing sector added 143,000 jobs, while the government payroll contracted by 9,000.
- The unemployment rate based on the household survey ticked down 0.1 points to 4.3%, while economists had braced for an unchanged reading.
- The U6 unemployment rate, considered a true measure of unemployment, edged up to 8% from 7.9%. This metric includes not only the unemployed but also the underemployed, the discouraged and marginally attached workers.
- The labor force participation rate declined to 59.2% from 59.3% in February and 59.9% in the year-ago period,
- The average hourly earnings edged up by 9 cents or 0.2% to $37.38. On a year-over-year (YoY) basis, the metrics climbed 3.5%, a slowdown from the 3.8% increase in February. Economists expected a more modest slowdown to 3.7%.
The revisions for the previous months’ were as follows:
- January: revised up by 34,000 to 160,000
- February: revised down by 41,000 to -92,000
The average monthly non-farm payroll gains for the three months ended March 2026 was 68,000.
Sector-Wise Job Status (March Vs February):
- Mining & logging: 43,000 (-20,000)
- Manufacturing: 26,000 (-13,000)
- Transportation & Warehousing: 21,000 (-48,500)
- Information: -21,000 (-3,000)
- Private education & health services: 91,000 (-42,000)
Commenting on the report, Northlight Asset Management Chris Zaccarelli said, “At the margin, this would make the Fed less likely to rush to cut interest rates, however, it also reinforces the idea that the job market is holding up, which should allow consumer spending to continue - a key lynchpin in this economy.”
“It is an environment in which corporate profits can remain elevated and can help to explain why the stock market hasn’t fallen as much as would otherwise be expected, given all of the shocks it has had to absorb.”
Economist Mohamed El-Erian said the blockbuster jobs report is “great news for Main Street.” “The further evidence of a robust American economy comes with the reality of rising inflationary pressures fueled by the War,” he said. But he also weighed in on the dip in the participation rate, which is a supply-side challenge and could pose a headwind for longer-term economic health.
Renaissance Macro observed that there hasn’t been much inflationary pressure. He noted that average hourly earnings for production and non-supervisory jobs were up only 3.4% YoY over the past year.
Average Hourly Earnings - Production & Non-Supervisory (YoY)
Source: BLS, FRB/Haver Analytics via RenMac X post
State of Labor Market: Among other recent labor market data, ADP’s private payrolls report released Wednesday showed a bigger-than-expected increase in job gains in March, and the Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS) survey showed a bigger-than-expected drop in job openings in February and hirings falling to a six-year low. Thursday’s jobless claims report showed an unexpected fall in the number of individuals filing for unemployment benefits but the Challenger, Gray & Christmas job cuts report for March showed a 25% month-over-month increase in layoffs. YoY the layoffs, however, fell 78%. The first-quarter job cuts were the lowest since 2022.
Implications for Rates: While formulating the monetary policy, the Federal Reserve weighs in its dual mandate of maximum employment and stable prices. A healthy labor market would give the Fed leeway to hike rates, especially a logical option, considering the rising inflation expectations and private sectors’ prices. The next Federal Open Market Committee (FOMC) meeting is scheduled for April 28-29.
Fifth Third Commercial Bank Chief U.S. Economist Bill Adams said the report told next to nothing about the Iran war impact on the job market. The economist expects the Fed to hold rates steady for at least the next few decisions as they assess the war’s impact.
The central bank paused interest rate cuts at the first two meetings of the year due to the economy’s resilience and inflation remaining above the central bank’s 2% target.
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