US employment growth likely rebounded in March, war casting shadow over labor market

“Everything is just moving at a snail’s pace, lots of uncertainty, and ‌we are still deporting people,” said Ron Hetrick, a senior labor economist at Lightcast.

HISTORICALLY LOW LABOR SUPPLY GROWTH

Mass deportations by the Trump administration have also contributed to labor market paralysis, economists said, by reducing supply, which ultimately hurts demand for goods and services, and workers. Historically low labor supply growth means less than 50,000 jobs per month were needed to keep up with growth in the working-age population, economists estimated.

Some estimates have put the break-even rate at zero or even negative. Economists at JPMorgan cautioned that “negative payroll readings in any given month will become more common,” adding that “even with job growth sufficient to stabilize the unemployment rate, there could be negative payroll readings at least a third of the time.”

While March was probably too early to capture the fallout from the Middle East conflict, some ‌economists said that could become evident as soon as April’s employment report. The national average retail gasoline price this ​week topped $4 a gallon for the first time in more than three years.

This will feed through to higher inflation and ​erode households’ purchasing power, offsetting some of the strength in wage growth, and slowing spending.

Average ​hourly earnings are forecast to have gained 0.3% last month, which would translate to a 3.7% annual increase in wages.

The war wiped off about $3.2 trillion from ‌the stock market in March. Trump on Wednesday vowed more aggressive strikes on ​Iran.

“Businesses are going to hunker down and go ​back in the bunker for a period of time,” said Brian Bethune, an economics professor at Boston College. “My guess is that period will likely be one or two months. So we will probably see that in April and May. The prospects for the second quarter are just not good.”

March’s employment report will not have any impact on the interest rate outlook, economists ​said, with the effects of supply chain disruptions from the conflict still ‌to work their way through the economy.

The odds of a rate cut this year have greatly diminished. The Federal Reserve left its benchmark overnight interest rate in the ​3.50%-3.75% range last month.

“Absent a pickup in layoffs, we see the ‘low-hire, low-layoff’ equilibrium as uncomfortable but sustainable and one that doesn’t call for pre-emptive Fed policy support,” said ​Andrew Husby, a senior economist at BNP Paribas Securities Corp.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci )