US Payrolls Unexpectedly Soar To 228K, Above Highest Estimate

After today’s shocking retaliation by China, which hiked tariffs on US goods by 34%, the jobs report was an afterthought. To be honest, it would have been an asymmetric afterhought any way, as any upside would have been viewed as stale and not reflecting the new tariff reality, while any miss would have cemented the recession case. And while the market is certainly far more focused on the ongoing trade war, in the end, the March jobs report ended up being far stronger than expected, as the US added a whopping 228K jobs, the highest since December and more than double the 117K in February (revised lower from 151K)…

… and beating the consensus estimate of 140K by 3 sigma

The number was also above the highest estimate from Wall Street analysts, which was 200K.

The change in total nonfarm payroll employment for January was revised down by 14,000, from +125,000 to +111,000, and the change for February was revised down by 34,000, from +151,000 to +117,000. With these revisions, employment in January and February combined is 48,000 lower than previously reported.

The unemployment rate rose from 4.1% to 4.2%, above the estimate of an unchanged print…

… as the number of unemployed workers rose modestly to 7.083 million from 7.052 million, even as the labor force rose fractionally from 170.359 million to 170.591 million.

And tied to that, while the Establishment survey rose by 228K, the Household survey also improved by a similar amount, with the number of employed workers rose by 201K, to 163.508 million.

Turning to wages, there was some more good news in the report, at least for those hoping for a fed rate cut: while the monthly average hourly earnings rose 0.3%, as expected and the same as last month, the annual increase in wages was 3.8%, down from 4.0% last month and below the 4.0% estimate, suggesting the wage growth continues to cool sharply, allowing the Fed to resume rate cuts.

Some more detailed from the jobs report: 

• The number of people employed part time for economic reasons, at 4.8 million, changed little in March. These individuals would have preferred full-time employment but were working part time because their hours had been reduced or they were unable to find full-time jobs.
• The number of people not in the labor force who currently want a job was essentially unchanged at 5.9 million in March. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a
• Among those not in the labor force who wanted a job, the number of people marginally attached to the labor force, at 1.7 million, was essentially unchanged in March. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, changed little at 509,000 in March.

Next we go through the qualitative breakdown of the Establishment survey, where we find that job gains occurred in health care, in social assistance, and in transportation and warehousing. Employment also increased in retail trade, partially reflecting the return of workers from a strike. Federal government employment declined.

• Health care added 54,000 jobs in March, in line with the average monthly gain of 52,000 over the prior 12 months. Over the month, employment continued to trend up in ambulatory health care services (+20,000), hospitals (+17,000), and nursing and residential care facilities (+17,000).
• Employment in social assistance increased by 24,000, higher than the average monthly gain of 19,000 over the prior 12 months. Over the month, individual and family services added 22,000 jobs.
• Retail trade added 24,000 jobs in March, as workers returning from a strike contributed to a job gain in food and beverage retailers (+21,000). General merchandise retailers lost 5,000 jobs.
• Employment in transportation and warehousing rose by 23,000 in March, about double the prior 12-month average gain of 12,000. In March, job gains in couriers and messengers (+16,000) and truck transportation (+10,000) were partially offset by a job loss in warehousing and storage (-9,000).
• Within government, federal government employment declined by 4,000 in March, following a loss of 11,000 jobs in February. (Employees on paid leave or receiving ongoing severance pay are counted as employed in the establishment survey.)

Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; information; financial activities; professional and business services; leisure and hospitality; and other services.

Here is a visual summary:

Commenting on the numbers, Trump posted on Truth Social that job numbers were “far better than expected” and that “it’s already working.”

Trump’s tweet suggests that contrary to some expectations, the president isn’t actually looking to throw the economy in a recession, but will push to keep it from crashing while he is playing the great game of trade war chicken with China and the rest of the world, which makes lives for traders more difficult as it means the Fed will have to make decisions on a tweet by tweet basis, which will be problematic.

Meanwhile, others disagreed: here is Seema Shah from Ptincipal Asset Management who encapsulates prevailing sentiment well:

“Everyone knows that economic weakness is coming, but at least we can be reassured that the labor market was robust coming into this policy-driven shock and therefore, the slowdown should not be overly steep. Next month is when hard data is likely to start showing signs of what soft data has already been signalling. From the Fed’s perspective, today’s payrolls number will not prevent them from future policy rate cuts – they know that this is just a moment of calm before the storm hits.”

Gregory Faranello, strategist at AmeriVet Securities, explained why today’s jobs report was largely ignored: “it’s all about the forward outlook around tariffs and the ensuing impact on global demand. You would never have thought to see yields performing this way with a jobs report like this.”

Ed Al-Hussainy, rates strategist at Columbia Threadneedle Investment, says “the market is betting that recession risks and the tightening of financial conditions will force the Fed to cut aggressively” now up to 100bp this year and rising. 

As for Powell’s speech later this morning, Al-Hussainy says: “If we get any pushback against this from Powell & Co., front end rates may end up offside.”

But perhaps the best wrap of today’s jobs report, however, was from Omair Sharif,  Inflation Insights: “Someone forgot there was a recession coming.”