Just 98,000 new jobs seems like a shockingly low number and represents the weakest pace of hiring in the US since May 2016, when a strike by Verizon workers and patchy weather weighed on job creation.
But economists and strategists on Wall Street argued that the slowdown in the headline figure is not all bad and most noted that the US Federal Reserve is likely to remain on track for two additional rate rises this year.
Goldman Sachs analysts have even increased their expectation of a rate rise when the Fed meets in June.
Overall market expectations for the Fed’s predicted two further interest rate increases in 2017 dipped marginally after the report but remain above 50 per cent. And markets have broadly weathered the poor headline number, despite an initial wobble.
The benchmark 10-year US Treasury yield rose back up to 2.38 per cent, having dropped as low as 2.27 per cent earlier in the day. Initial dollar weakness also quickly recovered.
A number of analysts pointed to recent bad weather impacting job creation, adding that the seasonally warmer weather in January and February also pulled job creation forward, compounding the effect.
“Mathematically speaking, the ‘adverse weather’ impact upon the March payroll report was a ‘statistical outlier’ of mammoth proportion,” said John Hermann, interest rate strategist at MUFG.
The weak non-farm payroll figures came as a surprise to some that had lifted their estimates after a report from payroll processor ADP earlier this week showed the US private sector had its best month for job creation since 2014 in March.
However, some suggested that the slowdown could be a sign that the economy is approaching full-employment or at least that the labour market is now pretty tight.
“The slowdown in payroll growth is exactly what you would expect when the economy closes in on full employment,” said Luke Bartholomew, an investment strategist at Aberdeen Asset Management.
It does not mean that there were not other pockets of weakness as well.
The retail industry continues to provide drag, topping the charts for the number of jobs lost in the US for the second month in a row, as big box retailers and department stores face store closures and even bankruptcy. Indeed, Friday’s report showed that the retail sector shed 29,700 jobs in March.
Elsewhere, defence stocks rose after the US launched missile strikes against a Syrian air base.
Lockheed Martin rose 1.2 per cent to $270.23 on Friday in New York while Raytheon, which makes the missiles used in the bombing, climbed 1.5 per cent to $152.96.
It could end up being more significant in steering the Fed’s hand in upcoming months than the weak jobs number, said Neil Wilson at ETX Capital.
“It’s still a decent number that is way above the paltry 38,000 registered in June 2016. This alone won’t stop the Fed from hiking twice more this year. A war in Syria might — geopolitics has taken on much greater significance again.”
Not everyone was so dismissive of the jobs number with Rob Martin, US economist at Barclays, saying there were “no silver linings” and that it could derail the Fed’s current path for monetary policy.
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