Nonfarm payroll employment in the US increased by 228,000 in March, surpassing consensus expectations.
Meanwhile, the unemployment rate remained little changed at 4.2%, having remained in the 4.0% – 4.2% range for the past ten months.
That said, significant upside risks to unemployment remain. For one, federal government layoffs from the recently established Department of Government Efficiency (DOGE) have yet to fully feed in, given the Bureau of Labour Statistics (BLS) counts those on severance pay and/or paid leave as employed.
Moreover, employment growth is expected to weaken as US firms adjust to the new tariffs introduced by President Trump this week. The automotive sector is particularly exposed to near-term layoffs, given its heavy reliance on globalised supply chains that cannot be easily restructured.
On balance, we expect that the Federal Reserve will hold interest rates steady at its next meeting in May.
