March Jobs - Strong Report, but a Slight Miss Compared to Elevated Expectations

Payroll additions are strong, but miss elevated expectations.  U.S. job growth momentum continued in March and previous reports were revised higher. Yields moved higher after the release, indicating that bond market investors believe this report provides ample justification for the Fed to continue hiking rates. At its March meeting, the median FOMC projection was for a year-end 2022 rate of 2.00%. The bond market is now pricing in a year-end rate of 2.25-2.50%, above of the median FOMC participant.

431K payrolls added in March – 60k below expectations. The U.S. labor market added 431k jobs in March and February numbers were revised upward to 750K (from +678K originally reported).  Forecasts for March ranged from +0K to +700K with a median of +490K so today’s outcome fell slightly short of expectations.  Job gains were again broad based, but led by leisure & hospitality (+112K), professional & business services (+102K), retail trade (+49k), and manufacturing (+38k).  At this point, the economy is 1.6 million jobs below pre-pandemic levels and nearly all of the change can be attributed to leisure & hospitality, which remains down 1.5 million jobs. Employment in many other sectors is now above February, 2020 levels.

3.6% unemployment – nearly back to prepandemic levels.  The U.S. unemployment rate fell 0.2% to 3.6% in March.  Forecasts ranged from 3.6% to 4.3% with a median of 3.7%.  The labor force participation rate was a bit higher, increasing from 62.3% to 62.4%, while hourly earnings increased from $31.60 to $31.73 for all workers, up 5.6% over the last year. Average hourly earnings for nonsupervisory & productions workers rose from $26.95 to $27.06, up 6.7% over the last year.