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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The key points
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Payroll growth smashed expectations in March with 178,000 jobs added compared to expectations for gains of just 60,000
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The unemployment rate fell to 4.3 per cent in March, down from 4.4 per cent in February and defying expectations for it to remain steady
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A big upward revision to January payrolls and a downward one for February left the picture for the year largely unchanged
The verdict
US job growth figures bounced upward during March after the start of the war in the Gulf and the shock of higher energy prices. These figures have been volatile this year with surprisingly strong job growth in January followed by a large decline in February.
When data behaves like a yo-yo, the Federal Reserve is unlikely to have strong convictions about trends or the necessary monetary policy response. The figures suggest the Fed is meeting its maximum employment mandate and that makes near-term rate cuts unlikely. The bar for a rate rise is very high.
The details
Private payroll growth was even stronger, with 186,000 jobs added in March than the overall rise in jobs. Much of this was a bounceback from February’s weakness, which was itself affected by strikes and adverse weather.
These justifications do not explain why the figures were much higher than expectations for job gains of 70,000. The additional jobs were concentrated in healthcare (+76,000), construction (+26,000) and transportation and warehousing (+21,000). Federal government employment continued to decline and was 18,000 jobs lower in March.
An unexpected drop in the unemployment rate further reinforces the labour market resilience story at a time of low rates of job churn.
Job gains for January were revised up 34,000 to 160,000, February job losses were revised lower by 41,000 to a decline of 133,000. On balance we think the more mature January data is likely to be indicative of the trend and that the February decline is the outlier but we have low confidence in this view.
The figures will make near-term rate reductions less likely, especially with headline inflation set to rise sharply in response to rapid increases in US road fuel costs.
We expect the Fed to continue to look through the coming inflation and remain on hold until the second half of the year. A new Fed chair will raise the prospect of rate cuts again later in 2026, although this will struggle to receive support from the rest of the FOMC if the labour market posts further figures such as these and the outlook for inflation remains challenging.
