Weekly Economic Trends and Indicators
The Headlines:
On Friday, the Bureau of Labor Statistics (BLS) reported that U.S. nonfarm payroll employment increased by 178,000 in March. This was well above market expectations, which were mostly around 50,000. Net revisions for January and February were -7,000 with January revised up 34,000 and February revised down 41,000. The average job growth over the 1st quarter was just over 68,000 per month.
The U.S. unemployment rate was little changed from February at 4.3%. Over the last year, the unemployment rate has ranged from a low of 4.1% in June to 4.5% in November.
The Details:
Goods producing employment rose modestly in March, with construction adding 26,000 jobs nationwide. Most of those were residential specialty trade contractors (11,200). Durable goods manufacturing added 15,000 jobs, while nondurable manufacturing was unchanged from February.
Private service providing firms added 143,000 jobs in March. As has frequently been the case over the last year, health care saw the largest gains with 76,400 jobs. Leisure and hospitality added 44,000 jobs with about half of that in food services and drinking places.
Federal government jobs continued to decline (-18,000) while local government gained 14,000.
The Context:
As we noted last month, there was a temporary decrease in health care jobs in February due to striking workers in California and Hawaii. Part of the increase in jobs in March was simply due to those workers returning to their jobs. Even so, this was an excellent report—especially considering the increased uncertainty surrounding the military action in Iran.
One of the strongest headwinds faced by the economy over the last year has been the stubbornness of inflation. With inflation closer to 3% than to 2%, the Federal Reserve found it necessary to pause the interest rate cuts longer than most people would have expected a year ago. Tariffs are part of the reason, as the rising price of some imports has added a few tenths of a percent to the overall inflation rate. However, because the tariff effect was expected to be temporary, many analysts expected rate cuts to resume once the tariff effect started to subside. The problem is that now, just as the inflationary effect of tariffs should be wearing off, we are being hit with a different kind of inflationary pressure—this time in the form of higher oil and gasoline prices.
Over the last month, market expectations of the federal funds rate (the Fed’s main policy rate) tracked by CME Fed Watch have gone from one or two cuts this year to zero cuts this year. These strong job growth numbers suggest that employers are confident that the economy can still withstand a mildly negative shock such as oil reaching $100 per barrel in the short-term--even with interest rates remaining higher for longer. However, the higher oil prices go, and the longer they stay at higher levels, the more risk there is to the outlook.
Next week: Quad Cities employment update
