US economy adds 303K jobs in March, much stronger than expected

U.S. job growth unexpectedly jumped in March, underscoring the resilience of the labor market even in the face of high interest rates and stubborn inflation.

Employers added 303,000 jobs in March, the Labor Department said in its monthly payroll report released Friday, easily topping the 200,000 gain forecast by LSEG economists. The unemployment rate inched lower to 3.8%, from 3.9% in February.

But wage growth was more subdued last month, with average hourly earnings, a key measure of inflation, rising 0.3%, in line with expectations. On an annual basis, wages increased 4.1% in March.

“The March jobs report illustrates the exceptional resilience in the labor economy – one in which conditions are tight, and job creation remains strong,” said Jim Baird, Plante Morgan Financial Advisors’ CIO. “The labor market has come off the boil of a few years ago, but remains on a very solid footing.”

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The surprisingly strong report paints a picture of a job market that has gone largely unscathed despite the Federal Reserve’s aggressive interest-rate hike campaign, but it also diminishes the odds of an imminent rate cut.

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Markets have been closely watching the report for evidence the labor market is finally softening after months of solid job gains as Fed policymakers weigh when to start cutting interest rates. Although inflation has fallen dramatically from its peak, progress has largely flatlined since the summer. 

Officials have signaled they are in no rush to cut, and that incoming economic data will guide their decision. 

“Some had been hoping that the Federal Reserve would cut interest rates at its June meeting; however, with today’s strong jobs report, it is all but certain that the first rate cut won’t be before July,” said Lisa Sturtevant, Bright MLS chief economist.

Stocks rose on Friday morning as investors brushed off the strong jobs data, with the Dow Jones Industrial Average climbing more than 300 points. About 60% of investors are still pricing in a quarter-point cut in June, according to the CME Group’s FedWatch tool, which tracks the probability of future moves.  

Job gains were broad-based last month, with the biggest increases in health care (72,000), the government (71,000), leisure and hospitality (49,000), and construction (39,000).

The labor market has remained historically tight over the past year, defying economists’ expectations for a slowdown. 

“Another blowout payroll report suggests the economy is running strong and far from recession,” said Sonu Verghese, global macro strategist at Carson Group. “On balance, this would push out any rate cuts by the Fed, but easing wage growth means we’re not in the middle of a labor-market induced inflation surge.”