U.S. Employment (March 2024)

Payrolls surprise to the upside (again), unemployment rate ticks down to 3.8%   

• Non-farm employment rose by 303k in March, considerably above the consensus forecast of 213k. Job gains in the two prior months were also revised higher by a combined 22k. 
• Private payrolls rose 232k, with the bulk of service sector gains (212k) concentrated in health care & social assistance (81.3k) and leisure & hospitality (49k). Hiring across the construction sector (+39k) rose by the fastest pace in nearly two-years. Government hiring remained robust in March, adding 71k jobs. 
• In the household survey, both the labor force (+469k) and civilian employment (+498k) recorded strong gains, with the latter more than offsetting February's pullback. The unemployment ticked down 0.1 percentage points to 3.8%, while the labor force participation rate rose 0.2 percentage points to 62.7%  
• Average hourly earnings (AHE) were up 0.3% month-on-month (m/m) – an acceleration from February's soft 0.1% m/m gain. On a twelve-month basis, AHE rose 4.1% – the slowest pace of wage growth since June 2021.

Key Implications

• Another solid employment report, with payroll gains coming in well above consensus and revisions showing a bit stronger pace of job creation in months prior. Through the first quarter, the U.S. economy added an impressive 829k new jobs – nearly a 200k more than in the fourth quarter of last year. With job openings still elevated and stronger immigration flows helping to alleviate some of the constraints on labor supply, job growth has the potential to run in the 150k-200k range through the remainder of the year.
• We heard from several voting FOMC members this week and the messaging was consistent: policymakers are in no rush to cut rates. With the labor market still strong and the economy humming, the FOMC can afford to be patient and wait for clearer signs that inflation is on a sustainable path back to 2% before dialing back the policy rate. Post-payrolls release, market pricing for a June cut has narrowed and bets are now more evenly split between June and July. Any upward surprise in next week's CPI release could fully push market expectations of the first rate cut to July, which would align to our forecast.

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