On the March Jobs Report

It’s too soon to see any effects from the Silicon Valley Bank failure, but this was a very solid jobs report with 236,000 net payrolls that slightly beat consensus expectations. The labor force expanded by 480,000 and employment expanded by even more, lowering the unemployment rate to 3.5%. Average hourly earnings grew, but barely more than the prior month’s downward revisions. Powell’s secret inflation index of “core services other than housing” peaked in November 2022, four months before average hourly earnings growth did – which starkly contradicts his claims that wage growth is feeding the sticky component of inflation he now focuses on. Job openings are down to a 22-month low, but since the Fed started tightening, payrolls have grown more than twice as much as openings have contracted, demonstrating that concerns with labor market tightness have been overdone. We continue to think there will be no more rate hikes.