Why Soft March Payrolls Aren’t a Weak Sign for the Economy



March payrolls came in lower than expected

The non-farm payrolls for March rose by 103,000, which was below the consensus expectation of 193,000 jobs being added and way below the February number of 326,000 jobs. This is the lowest number of jobs added in the last six months, but this should not be a reason to worry. There are a few factors that led to the decline in the number of jobs in March. The surprisingly strong job growth in February and the winter storm in the Northeast region could be factors for the low reading in March.

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The unemployment rate remained unchanged at 4.1%

The unemployment rate for March remained unchanged at 4.1%. The reading has been stagnant for the last six months. Companies have been reporting difficulty finding skilled staff, and this shortage could lead to a continued increase in wages. The March report indicated that the average hourly earnings rose 0.3% in March and have risen 2.3% in the last 12 months. This is a strong indication that total earnings of workers are increasing rapidly, which could lead to higher aggregate demand and could contribute to higher inflation (TIP).

Within the industries, the manufacturing (XLI) sector added 22,000 jobs, professional and business services added 33,000 jobs, mining added 9,000 jobs, healthcare (IXJ) added 22,000 jobs, and there were no substantial job losses in any of the sectors.

Why were markets disappointed with the non-farm payrolls data?

Markets received a negative shock after the decline in jobs added, but this report was overlooked as investors focused on the trade war developments, which led to a 2% decline in equity indexes on that day. The bond (BND) and currency (UUP) markets also displayed a muted reaction, as there was no immediate change to the rate outlook with the Fed raising interest rates only a few days before this report.

In the next part of this series, we’ll analyze the sharp rise in the final Michigan Consumer Sentiment for March.


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