Big reversal! March Non-Farm payrolls added 178,000, wiping out rate-cut expectations “completely”

On April 3, the U.S. Bureau of Labor Statistics released the March Non-Farm Employment report, and the data completely overturned market expectations.

Key data: a total blowout vs. expectations

· March Non-Farm payrolls: added 178,000 jobs, while the market expected only 60,000, the highest level since December 2024
· Unemployment rate: fell from 4.4% to 4.3%, better than the expected 4.4%
· Average hourly earnings: up 0.2% month over month and 3.5% year over year, both below market expectations, indicating moderate wage-inflation pressure

Revisions: January was revised upward, and February was revised downward by even more

· January new jobs were revised up from 126,000 to 160,000
· February new jobs were revised down from -92,000 to -133,000
· After revisions, total new jobs added in January and February decreased by 70,000 compared with before the revisions

Employment structure: the healthcare industry contributed more than half

The employment rebound was mainly driven by the healthcare industry. In March, the healthcare and health care sector added 76,000 new positions, accounting for nearly half of the total increase. Previously, a strike by about 31,000 employees at the California and Hawaii Kaiser Permanente healthcare group was resolved in March, significantly helping healthcare employment recover. In addition, construction added 26,000 new positions, and transportation and warehousing added 21,000 new positions; employment at the federal government continued to decline by 18,000 positions.

Immediate market reaction

After the Non-Farm release, the U.S. Dollar Index surged sharply in the short term, reaching a peak of 100.1. U.S. Treasury yields climbed, with the 10-year Treasury yield rising by 4 basis points to 4.35%. U.S. stocks closed due to the Good Friday holiday; after a brief uptick, futures markets turned lower, with S&P 500 futures down 0.3% and Nasdaq futures down 0.4%. In the crypto market, BTC briefly surged above $67,000 and then quickly fell back to around $66,850, facing near-term pressure.

Rate cut expectations: from “two times this year” to “basically cleared to zero”

After the data was released, the CME FedWatch tool showed the probability that the market expects the Federal Reserve to keep rates unchanged through the end of 2026 rose to about 80%. Traders have basically wiped out the remaining rate-cut expectations for the rest of this year, and even started pricing in the possibility of modest rate hikes within the year. The market believes the probability of the Fed raising rates to 3.75%-4% has risen to 10.1%, up from only 0.2% on Thursday.

Jefferies’ Chief Economist noted that this data is unlikely to change the judgment of Federal Reserve policymakers, because most of the data is lagging and has not yet reflected the impact of rising energy prices or risks related to the Iran war.

A TJM Institutional rate strategist said the Fed is “very likely to keep rates unchanged until at least the end of June, or even longer.”

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