For once, market expectations for the US non-farm payrolls report were just about bang on the money. The BLS reported today that the US economy added 236,000 jobs in March, while the analysts consensus had called for 239,000.* The unemployment rate edged down to 3.5 percent. This was the smallest monthly gain in employment since December 2020. Perhaps a more useful comparison is to look back to the pre-COVID era: on this basis, today's report is the weakest for any month since December 2019.
The wage data remain more intriguing than the headline-grabbing employment numbers. Average hourly earnings rose 0.3 percent in March, dropping the year-on-year gain to 4.2 percent from the 4.3 percent posted in February. The lack of upward pressure on wages may in part be explained by the gradual upward trend in both the labor force participation rate and the employment-population ratio, though both of these remain slightly below their pre-pandemic levels. An alternative explanation, of course, is that the Phillips-curve-based expectation that wages and inflation can only be kept in check if unemployment rises is simply incorrect.
The Federal Reserve cannot base its rate decisions on just one month's data. That said, however, today's report looks for the most part to be Fed-friendly. Employment growth may finally be showing signs of easing to a more sustainable pace, while wage gains remain well in check (and well below the rate of CPI inflation). The FOMC may not explicitly declare any kind of pause in tightening just yet, but there is no obvious need for any further rate hikes in the near term.
* CNN described the print as "below expectations". Given the nature of the report and the inevitability of revisions, this is ridiculous.
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