Nomura: North America Economics — US March Employment Recap
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Nomura reports that US nonfarm payrolls increased by 178,000 in March, the fastest monthly pace in over a year, while the unemployment rate fell to 4.256% (rounded to 4.3%). The three-month moving average rose to 68,000. Hiring was broad-based across 56.8% of private industries, the highest diffusion since 2023. Notable gains occurred in construction and leisure/hospitality due to normalising weather, alongside a 91,000 surge in education and health from the resolution of a nursing strike.
The unemployment rate dropped 18 basis points month-over-month, aided by a rebound in the job-finding rate to 24.9% and a decline in layoffs. Younger workers (aged 16-24) saw the most significant unemployment improvements, reversing recent upward trends. However, wage growth details remained weak. Average hourly earnings rose just 0.24% MoM, below expectations, and average weekly hours declined. Consequently, private wage income grew a mere 0.1%, potentially constraining future consumer spending despite current resilience in high-frequency data and auto sales.
Nomura suggests that while some employment acceleration may be temporary, broad indicators signal labour market resilience and initial re-acceleration. With inflation pressures rising alongside robust employment, the Federal Reserve is expected to maintain interest rates unchanged. A potential shift in the policy reaction function may only occur after the confirmation of Kevin Warsh as Fed Chair.