What to expect from the March jobs report

Job growth expected to see 'gentle softening' in March

The March jobs report is expected to show the U.S. labor market again defied predictions for a sharp slowdown even as it battles higher interest rates and chronic inflation.

The Labor Department's high-stakes March payroll report, due at 8:30 a.m. ET Friday, is projected to show that hiring increased by 200,000 last month and that the unemployment rate held steady at 3.9%, according to a median estimate by LSEG economists.

That would mark a decrease from the 275,000 gain in February and the average monthly gain of 270,000 recorded over the past 12 months.

"The March jobs report will likely show a gentle softening in labor market conditions with private sector hiring falling back below the 200,000-mark and wage growth cooling," said Lydia Boussour, EY senior economist. "Payrolls in the prior two months will likely be revised lower in keeping with the recent pattern of downward revisions."

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Employers at a job fair in California

More than 75 employers were taking résumés and talking to prospective new hires at a career fair in Lake Forest, California, on Feb. 21. (Paul Bersebach/MediaNews Group/Orange County Register via / Getty Images)

The Federal Reserve is closely watching the report for evidence that the labor market is finally softening after months of surprisingly solid job gains as policymakers try to ensure that progress on reducing inflation does not stall. Officials have suggested that fast wage growth — the product of a strong labor market — was a contributing factor to the inflation crisis that ravaged millions of Americans' pocketbooks over the past few years. 

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Slower job growth and further moderation in wage gains could be a welcome sign for the U.S. central bank, which has signaled plans to cut interest rates this year once it is certain that inflation is tamed.

Average hourly earnings, a key measure of inflation, are expected to increase 0.3% for the month and climb 4.1% from the same time one year ago.

The forecast, if accurate, "should reduce fears of reacceleration and the risk that the Fed cannot ease policy this year," Bank of America said in an analyst note this week. "It should re-anchor expectations for a cooling labor market, but not one that is showing significant signs of weakness."

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The labor market has remained historically tight over the past year, defying economists' expectations for a slowdown. Economists say it is beginning to slow after last year's blistering pace but is still nowhere near breaking.

A separate report released Thursday by Challenger, Gray & Christmas found that the pace of job cuts by U.S. employers accelerated in March.

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Findings from the firm indicate that companies planned 90,309 job cuts in March, a 7% increase from the previous month and a 0.7% increase from the same time last year. 

It marked the highest monthly layoff total since January 2023.

The data points to a labor market that is moderating in the face of growing headwinds.

"Looking ahead, we foresee softer labor market conditions with slower hiring, some strategic resizing decisions and some continued moderation in nominal wage growth," Boussour said. "We expect job growth to slow below trend over the course of the year and see the unemployment rate rising to 4.2% by year-end."