The US saw a robust surge in hiring in March as non-farm payrolls exceeded expectations by adding 303,000 jobs to the economy.
This impressive growth, coupled with minimal revisions to previous months’ data, has propelled the three-month average pace of job gains to its strongest level in a year, standing at 276,000. Notably, the unemployment rate dropped to 3.8%, supported by a resurgence in household employment metrics.
The upward trajectory of labour supply was another highlight of March, as evidenced by the participation rate climbing to a four-month high of 62.7%. This sustained growth in labour supply has played a pivotal role in sustaining hiring momentum while alleviating inflationary pressures emanating from the labour market.
However, despite the uptick in hiring, wage growth experienced a slowdown, reaching a three-year low of 4.1% on a year-over-year basis.
In addition to the buoyant labour market, the latest economic forecast update suggests a nuanced approach by the Federal Open Market Committee (FOMC). While initially projecting a 100-basis-point easing in monetary policy this year, recent data indicate a tilt towards a more conservative stance, given the resilience of the labour market. This sentiment underscores the FOMC’s inclination to await further progress on the inflation front before contemplating policy adjustments.
Looking ahead, while the labour market remains resilient, indications of a potential slowdown in hiring plans and job openings warrant cautious optimism. Businesses, increasingly content with current staffing levels, coupled with a marginal uptick in layoffs, suggest a more balanced labour market outlook. However, the possibility of a sudden downturn underscores the need for vigilance among FOMC members.
Ultimately, the primary focus remains on restoring inflation to the Fed’s target of 2%, with further progress awaited before any policy adjustments are considered.
Market commentary and analysis from Luca Santos, currency analyst ACY Securities
