The consensus among analysts and economists is that a slower US economy in March will be reflected in a drop in job creation numbers. With the Fed’s second mandate to maintain full employment, a deteriorating labor market might suggest that more easing is needed. However, if the jobs numbers are really bad, it could cause markets to start to really worry about a recession.
Gold prices have been elevated recently due to the uncertainty around tariffs. The worry is that the higher cost of doing business from the higher taxes would slow down the economy. This has pushed down the dollar, giving competing currencies (particularly in Europe) a bit of a boost. Now that the big tariff announcements are in the rearview mirror, markets can look at the data to see if their fears are being realized.
Sinking, Bouncing or Carry On
March NFP figures are getting extra scrutiny for a couple of reasons. First, if tariffs are having an immediate effect on jobs in US, that would likely be reflected in Friday’s release, since it covers the period after the implementation of the first round of tariffs. Secondly, the US President Donald Trump put a hiring freeze in effect as soon as he took office, meaning the usual growth in government jobs won’t be there.
In fact, March is expected to have the first indications of the effects that DOGE is having on the Federal workforce. It takes a bit of time to process terminations, so March is likely to be the first month to see the effects of job cuts in the government. So, even if the private sector sees growth, the overall jobs number might suffer as a result of the negative growth in government employment.
What the Data is Expected to Say
The consensus among analysts is that US March Non Farm Payrolls will drop precipitously to 80K. That’s below the 151K record in the prior month, and below the 190K that was the average of the last six months. That includes an expectation of 50K jobs lost in the government.
The unemployment rate is expected to tick up marginally to 4.2% from 4.1% in February, with the labor force participation rate remaining unchanged. Meanwhile, hourly earnings are expected to show the same growth rate as last month at 4.0%, exceeding the inflation rate.
Tightening or Loosening
After last month’s figures, the Fed affirmed its belief that the jobs market was balanced and didn’t pose an inflationary threat. If the jobs in US numbers fall enough, it could mean that inflation might undershoot. That would put additional pressure on the Fed to start easing, particularly if there is a large increase in the unemployment rate.
But, if the numbers are really bad, it could leave the market worried that a recession is imminent. That could precipitate a rout in the stock market, deepening the dynamics that have weakened the dollar and pushed gold higher. The opposite scenario, where job performance exceeds expectations, would likely produce the opposite effect in a relief rally. However, that dynamic might be muted and short-lived, as labor data is seen as a lagging indicator. If the jobs in US market is still solid, it just might be that the impending economic slowdown hasn’t shown up in the data yet. Markets will likely need more data to feel reassured that the economy will pick up now.
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