Evercore ISI economists said that Friday’s jobs report confirms that the Federal Reserve does not have to rush to reduce interest rates this year.
The Labor Department’s Bureau of Labor Statistics announced that nonfarm payrolls rose by 303,000 in March, blasting past the Dow Jones projection of a 200,000 increase and outdoing February’s revised gain of 270,000.
The unemployment rate slightly declined to 3.8%, aligning with forecasts, despite an increase in the labor force participation rate to 62.7%, up by 0.2 percentage points from the previous month.
“With the household survey also showing big monthly gains, the data suggests the US labor market is even stronger than we thought and may be getting stronger,” economists at Piper Sandler wrote.
“This print has to lower rather than increase the probability of a Fed June cut at the margin. The question is by how much. We think a lot less than the knee-jerk reaction in the market implies,” they added.
Economists said the Fed can now focus on the upcoming two employment reports to look for any indicators of the labor market re-tightening before making its decision in June. Currently, the data aligns with a narrative of positive labor supply.
Simultaneously, the employment figures from March emphasize that the central bank is not under pressure to reduce rates immediately “and can wait until it has sufficient visibility on the underlying inflation trajectory,” said Piper Sandler.
