Top of the Morning: March jobs report, US trade policy, & the week ahead
The desk views the March employment report as a pivotal indicator of the U.S. labor market's resilience, despite a slight uptick in the unemployment rate to 4.2% and a moderation in wage growth. Per the full note from UBS, the report revealed solid non-farm payroll gains of 228,000, which exceeded expectations, although revisions to prior months indicated some softness beneath the surface. This backdrop supports a more cautious approach to U.S. trade policy, especially after recent tariff announcements that could impact market dynamics. Currently, consensus targets among firms show a recognition of these labor market trends, with focus shifting towards how they will shape the broader economic landscape moving forward.
What the desk is arguing
The U.S. labor market remains strong, as evidenced by the addition of 228,000 jobs in March, despite upward revisions and a rising unemployment rate. UBS economist Brian Rose highlights that while average hourly earnings have moderated to 3.8% year-over-year, the labor market's balance is still favorable. This perspective reinforces the desk's belief in continued economic resilience amid evolving trade policies.
The reported job openings stood at 7.6 million, down slightly from previous levels, showing that while demand for labor is stabilizing, there remains a robust vacancy rate relative to the number unemployed. This balance hints at sustained consumer spending power, which the desk believes will be crucial in the months ahead as tariff repercussions unfold.
Where it sits in our coverage
Our current consensus target for the USD is 1.075, with a range of 1.04 to 1.12. Notable targets from our tracked firms include: - jpmorgan: 1.10 (Mar 26) - bofa: 1.04 (Mar 26)
The view articulated here aligns closely with the jpmorgan forecast, which also reflects a cautious but optimistic stance in light of recent employment figures, while diverging from bofa's more bearish outlook.
How other firms see it
Firms like jpmorgan and others are coalescing around a positive view of the labor market's strength, factoring this into their forecasts for the USD. In contrast, bofa continues to adopt a more pessimistic perspective on U.S. economic competitiveness as trade policy adjusts.
The discussion around the EUR/USD trajectory, particularly in light of Federal Reserve policy decisions, becomes increasingly relevant as we process these labor market trends against ongoing trade tensions. This correlation will be key to monitor as economic indicators shift.
What the calendar says
No major events on the calendar ahead, but traders should remain vigilant for any unexpected announcements regarding U.S. trade policy that could dramatically shift market dynamics.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Solid U.S. labor market signals despite rising unemployment.
- 02Tariff implications remain a critical theme for market dynamics.
- 03Watch the interplay between job reports and Fed policy decisions.
- 04Consensus targets reflect mixed outlooks on the dollar.
Market implications
Traders should watch for movements around the 1.075 level for the USD, as insights from the labor market and tariff impact will shape expectations. Any unexpected tariff changes could lead to significant fluctuations, especially prior to key Fed assessments.
Risks to this view
An unexpected spike in unemployment rates or a significant downturn in consumer spending could force a reassessment of the labor market's strength. Additionally, adverse effects from recent tariffs on trade could lead to a bearish sentiment shift for the USD.
Hi everyone, Siobhan Chapman here and welcome to Top of the Morning on the UBS Market Moves podcast channel. It's Friday morning, which means it's time for the Week in Review and Preview conversation, where my guests will recap how markets have performed over the past few sessions and previews you can expect in the week ahead. Today's conversation primarily focuses on March's jobs report as well as new tariff updates.
Joining us for the conversation, I'm glad to welcome back Senior Economist America's Brian Rose. Brian, welcome. We're happy to have you.
Good morning, everyone. Good morning, Brian. So let's get started.
Let's begin with the March employment report. How did the data come in and how would you characterize the current health of the U.S. labor market? Overall, this was a solid result.
We had the non-farm payrolls rising $228,000, which was more than expected, but there were downward revisions of $48,000 over the previous two months. And there's some special factors that helped to boost the payroll numbers. So we had some returning striking workers and also weather improved.
But again, hard to complain about this kind of number. The unemployment rate did tick higher to 4.2%. That's at the top of the recent range.
We haven't been above 4.2% since late 2021, but still within the recent range. So nothing too concerning there. And in terms of wages, average hourly earnings up three-tenths month over month, year over year has slowed to 3.8%.
So you are seeing some moderation in the pace of wage growth. But again, 3.8%, nothing really to complain about. And I'll mention here a couple of other related indicators we had this week.
We had jolts job openings down a bit in February to $7.6 million compared with the $7.1 million unemployed we had in this morning's data. Still a good balance in the labor market. And we had the weekly jobless claims remaining low.
So again, you add the states together, at least as of now, labor market still looks to be in quite good shape. So I want to move outside of the jobs numbers. What were some other notable data releases from this past week?
So we had the ISM PMIs out, which both manufacturing and non-manufacturing were weak. Manufacturing PMI fell back below 50. And you also see a more inflationary pressure in the data.
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