The March jobs report was solid, with nonfarm payrolls posting a strong 196K gain. That confirms that the weak February reading of 33K—which was revised up to 13K relative to the initial estimate—was indeed an aberration. With payroll gains averaging 180K over the first three months of 2019, the labor market appears to still have momentum. Indeed, that’s almost exactly the monthly pace of job gains we predicted for Q1 in our December forecast. That supports the narrative that the U.S. economy is on a healthy growth trajectory despite the recent spending data pointing to a slowdown in private demand in the first quarter.
This report doesn’t change our Fed call (the next move more likely to be a cut than a hike, but no cut or hike in the near term). Markets have recently priced in a greater probability of a rate cut in the near term, but this report should help to dampen such speculation. At the same time, this report doesn’t indicate any overheating that would push the FOMC to return to a tightening bias, as much of the rest of the report was rather lackluster. Average hourly earnings increased a meager 0.14% in March following a strong 0.40% gain in February. That brought the 12-month change back down to 3.2%, from 3.4%. And the unemployment rate remained at 3.8% even as the participation rate edged down a couple of tenths. The broader U-6 rate also held steady.