The 98,000 jobs added to payrolls in the US in March were well below the consensus estimate of 178,000, especially when you consider downward revisions to January and February totalled 38,000. I don’t believe this matters for the Fed though; policy tightening will continue apace. Below I will break down the numbers and tell you why the Fed won’t be too bothered by this weak employment report.

First, let me give you a number of key stats that I am going to use to make a composite picture. Here they are:

  • Poor business survey data. Non-Farm Payrolls increased by 98,000 in March, with downward revisions taking that number to a net of 60,000. This follows robust numbers of 216,000 in January and 219,000 in February. This is data derived from the business survey.
  • Good household survey data. The unemployment rate declined to 4.5% from the 4.7% expected. And this is not because people were dropping out of the workforce either. Rather the decline was due to a decline of 326,000 in the number of unemployed. According to these household survey data, on net, we saw 472,000 more people employed in March as well, pushing up the labour force by 145,000.
  • Broader measures of unemployment positive. The U-6 number that includes marginally attached workers and those working part-time involuntarily went down to 8.9%, with the labour participation rate stable at 63.0%. These are the two most commonly cited broad labour market measures. And both look good. The spread between the U-6 number and the U-3 number is now at its lowest level since the financial crisis at 4.4%.
  • Wages show nothing that screams inflation. Wage growth is often called wage ‘inflation’ because there is a belief it is a portent of general inflation that the Fed must deal with pre-emptively. I don’t buy into this thinking. But even so, the numbers – 2.7% for average hourly earnings and 2.4% for weekly earnings compared to the year ago levels – don’t speak to any inflationary pressures.
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