U.S. payrolls rise by 178,000 in March, beating expectations

U.S. nonfarm payrolls rose by 178,000 in March, after a drop of 133,000 in February, well above the 59,000 forecast by economists, the Labor Department said on April 3. February’s figure was revised down by 41,000, while January was revised up by 34,000 to 160,000, bringing the three-month average to about 68,000. The unemployment rate fell modestly to 4.3%, but mainly because the labor force contracted sharply. 'In sum, March data is somewhat positive, but the labor market has undergone a volatile year with almost no net hiring growth since April last year,' said Heather Long, chief economist at Navy Federal Credit Union. 'This data will keep the Fed on hold, but no one can declare victory yet. This could be a tough spring for job seekers.' As usual, the healthcare sector contributed the most to the gain, adding 76,000 jobs. The Kaiser Permanente strike in February had affected earlier data. The Labor Department said outpatient care rose by 54,000, with 35,000 coming from workers returning from strikes. Construction added 26,000 jobs, while transportation and warehousing rose 21,000. On the other hand, the federal government sector cut 18,000 jobs, and the financials sector declined 15,000. Even as the unemployment rate fell, the main reason was a 396,000 decline in the labor force. The labor force participation rate fell to 61.9%, the lowest since November 2021. A broader unemployment measure, including discouraged workers and those working part-time for economic reasons, rose slightly to 8%. Long-term unemployment remained high, although the average duration of unemployment fell to 25.3 weeks. Wages also rose less than expected, with average hourly earnings up 0.2% from February and 3.5% from a year earlier, below forecasts of 0.3% and 3.7%, respectively. The year-over-year gain was the weakest since May 2021. Average hours worked fell to 34.2 hours, down 0.1 from February. U.S. stock markets closed for the Easter holiday. Stock-index futures fell modestly after the report. The bond market remained active, with yields higher ahead of an early close. Fed officials are weighing the jobs data to guide interest-rate policy. Most remain on hold and data-dependent, though some favor rate cuts to curb labor-market weakness. However, with inflation still above the Fed’s target and energy prices rising sharply due to the Iran conflict, markets expect the central bank to keep policy relatively unchanged this year. After the jobs report, futures markets implied almost no chance of a rate move at the April 28-29 meeting, with CME Group’s FedWatch implying about a 77.5% probability that the Fed will hold rates through year-end.