March Jobs Report – The Calm Before the Storm?

• March nonfarm payrolls rose 228 thousand, easily beating the 140 thousand expectation and 117 thousand in February (revised down from an initial 151 thousand). January was revised down by 16 thousand jobs bringing the two-month revisions to down 48 thousand. Private sector job growth was solid at 209 thousand which was well clear of the 135 thousand expected and above the downwardly revised 116 thousand in February and ADP’s 155 thousand reported earlier this week. As we seem to say every month, it needs to be noted the monthly revisions are generally to the downside which has been an ongoing theme for more than a year now.

 

• The Household Survey, which is smaller in size than the Establishment Survey and then extrapolated across population totals, generates the unemployment rate, labor force participation rate, etc.. The survey reported 201 thousand new jobs and a 31 thousand increase in unemployed persons. However, total unemployed increased from 6.497 million a year ago to 7.083 million, an increase of 586 thousand. The survey also reported a 232 thousand increase in the labor force. With the increase in unemployed and slight increase in the labor force the unemployment rate increased from 4.1% (4.139% unrounded) to 4.2% (4.152% unrounded), above the 4.1% expectation. With the increase in the labor force, the Labor Force Participation Rate increased one-tenth to 62.5%, beating the 62.4% expectation and February result. The participation rate has been range bound for quite some time, for instance, it was 62.7% a year ago.

 

• The Underemployment Rate (the unemployment rate plus part-time but wanting full-time, and those wanting work and having looked at some point in the last year) decreased from 8.0% to 7.9% (see graph below).  That level peaked at 23% back in April 2020. It bottomed at 6.6% a couple times back in 2022, just as the Fed was beginning its rate-hiking cycle. It wouldn’t surprise us to see this rate continue to climb in the months ahead given the slower growth posture of the economy and the ongoing government cutbacks.

 

• Job gains were strongest in healthcare/social assistance, a perennially strong category, (78k), leisure/hospitality (43k), retail trade (24k), transportation/warehousing (23k), and government (19k). Obviously, state, and local governments helped offset the federal job losses. Job losses were concentrated in temporary help (-6k), and durable goods (-3k) (see graph below).   It continues to be easy to see the strength in service sector hiring vs. the goods side of the economy and that is what we’ve been seeing across a host of reports with services really carrying the economy and that continues to be the case.

 

• Average Hourly Earnings rose 0.3% (0.251% unrounded) MoM, matching expectations, albeit a “low” 0.3%, and matching the February gain of 0.3% (0.33%unrounded).   The year-over-year pace dipped to 3.8%, missing the 4.0% expectation (see graph below). Average weekly hours remained at 34.2 hours for the second straight month and matching expectations. A tenth of an hour may not sound like much but with 163 million full-time workers each tenth of an hour is just over $1 billion in wages.

 

• March’s jobs report was expected to reflect resilience before the expected slowing and that’s what we got. However, with the recent maximalist tariff news, this report could be the last before we see an unmistakable weakening brought on by fears of slower growth. While the weekly jobless claims series looks benign, for now, the Challenger Job Cuts release for March just reported the highest layoff figure since April/May 2020. With the shadow of tariff wars hanging over the global market, the already hesitant consumer appears likely to remain so along with businesses waiting on capital investments until more clarity is available. If one looked at this report in isolation it could be taken as a solid release, but it appears to us to be the calm before the storm. The question is will the Fed rely on this report as confirmation of their pause approach, or will they read it as slightly dated given the fast-moving events in the market?  

 

• Shifting gears, in the week ending March 29, the initial jobless claims totaled 219 thousand, a decrease of 6 thousand from the previous week’s revised level of 225 thousand. The continuing claims figure for the week ending March 29 was 1.903 million, an increase of 56 thousand from the previous week’s revised level of 1.847 million. The 4-week moving average was 1.870 million. While those numbers were not too troubling, the Challenger Job Cuts Survey posted the largest level of planned job cuts since April/May 2020, with federal employees constituting 216 thousand of the planned 275 thousand job cuts.

 

• The ISM’s Services Index for March disappointed at 50.8 from 53.5 a month earlier. Expectations were for a slight dip to 52.9, with fears it could slide below 50, signaling a contracting sector. The sub-indices were troubling as well. The index of services employment fell solidly into contractionary territory at 46.2 from 53.9.  The Prices Index registered 60.9% in March, a 1.7-percentage point decrease from February’s reading of 62.6%, a fourth consecutive reading above 60%.  Meanwhile, the New Orders Index recorded a reading of 50.4% in March, 1.8 percentage points lower than the February figure of 52.2%. Given the service-side of the economy has driven the expansion for the past year, the slowing in activity, combined with the increase in costs, does not bode well if this result continues in the months ahead.

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Source: BLS

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